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AMERICAN BUSINESS IN 
WORLD MARKETS 
JAMES T. M. MOORE 



AMERICAN BUSINESS 
IN WORLD MARKETS 

OUR OPPORTUNITIES AND OBLIGATIONS IN 

SECURING EXPORT TRADE 
THE PLANS AND PURPOSES OF OTHER NATIONS 

By 
JAMES T. M. MOORE 




NEW X5Jr YORK 
GEORGE H. DORAN COMPANY 



•\k 



Copyright, 1919, 
By George H. Doran Company 



MAM 2'' 
Printed in the United States of America 

©CLA525565 



CONTENTS 

PART I 
AMERICA'S NEW ECONOMIC STATUS 

CHAPTER PAGB 

I The Business Man's Era 13 

The Business Man Coming into His Own — The Politician's 
Influence Wanes — Where Power Rightfully Belongs — 
Ancient Civilisations Compare Poorly with That Which 
Business Enterprise Has Brought — War Inspired Industry 
with Disposition to Resist Oppression — Its Spirit of 
Pacifism Is Gone. 

II Shares in Winning the War 17 

The War Was a Commercial One at Least in Its Finish — 
World's Greatest Military Power Proved to Be Industry — 
A Foreign Tribute to Share of American Business Men — 
Those Who Have Proven Title to Leadership — Rights of 
Business Will Be Asserted. 

III Congress or Business Men 20 

The Gathering at Atlantic City — How Future Congresses 
May Be Conducted — Things to Be Taken for Granted — 
Action and Decision on Action Their Proper Function — 
Those Who May Participate — Workers Also Are Indus- 
trialists — Others Who Merit Title of "Honorary Business 
Men." 

IV The Right of Combination 25 

Combination Was Essential to Victory — The Handicap 
of Restrictive Laws — Advantages and Possible Dangers of 
Industrial Union — Business Men Best Qualified to Work 
Out the Solution — Union Needed to Alleviate Unemploy- 
ment — How the Creation of New Industries is Promoted — 
Price "Stabilisation." 

V A New Ideal of Competition 30 

Unnecessary Waste a Gross Injury to the Country — The 
Enforced Competition that Fostered Disloyal Trade 
Practices — War Industries Board Showed a New Way — 
Fair to Government and Fair to Industry — The Legislation 
That Is To Be Desired. 

VI Industrial Lessons of the War .... 35 

Standardisation — Its True Meaning — A Middle Course 
Between Extremes — How Industry May Be Benefited — 

v 



vi CONTENTS 

CHAPTER PAGE 

Danger of Preaching Abstractions. Business Courage — 
Its Absence Helps Wasteful Competition — How the 
Great Industries Showed Up Under the Test — The 
Courage That Is Desirable — Conservation in Peace — 
War Policies Do Not Apply — Ill-Conceived Conservation 
Would Retard Progress — Cost Accounting — Lax Methods 
Lead to Waste — A Uniform System Is Demanded. 

VII Need of More Power in Industry 46 

Why the American Workman Is Unrivalled — More 
Power at His Service — Importance of Developing Water 
Power — Business Congress Adopts Resolution — What 
a British Committee Discovered — The Best Cure for 
Low Wages — Other Nations Alive to the Need. 

VIII Slanders Against American Business .... 54 

Tales Spread Abroad About "Commercial Corruption" — 
A Dr. Jekyll and Mr. Hyde Idea — Responsibility of Our 
Own Politicians and Organs of Publicity — A Charge 
Made by Mr. Gompers — Remedies Needed to Re-estabilsh 
a Right Understanding. 

IX Industrial Relations 60 

Capital — Catch- words That Stigmatise American Busi- 
ness — Labor the Nursery of Capital — Their Interests 
Undivided — Labor — The American Workingman Refuses 
To Be Labelled — Appreciates His Rights as an American — 
Representation of Labor — Participation in Industrial 
Administration — Error of Judging from Extremes — The 
La Follette Law — Where Labor May Be Brought In — 
Welfare Work Improperly Conceived — Minimum Wage — 
111 Success in French Cities — A British Plan — The 
"Minimum Plus" — International Proposals. 

X Influences Against Bolshevism 75 

Germany's Foul Crime — A Typical Russian Nihilist Group 
— Wolfish Leader and Following of Defectives—Organised 
for Sabotage in Industry — Waves of Crime That Follow 
War — The True American Worker^Immune — The Remedy 
of Publicity. 

XI The Doctrines of Americanism 82 

Scheme of Existence — America's New Relation to World 
Affairs — No Longer in a Charmed World — We Must 
Uphold American Principles — No Standing Still — Govern- 
ment Paternalism as an Alternative — Control — The 
Democratic Principle — The Foundations — Who Shall 
Conserve the Republic? — The Politician's Claim — That of 
the Industrialist — The Control That Belongs to Labor — 
Responsibility — Power Without Responsibility — Need of 
a New Rule — Where Capital, Labor and the Community 
Have Been Delinquent — The Case of the Newspaper. 

XII Statesmen's Judgments 89 

Secretary Lane's Views and Prospects — Confidence in the 
American People — The Get-Together Habit — Disposition 



CONTENTS vii 

CHAPTER PAGE 

of the Administration to Co-operate in Solving Business 
Problems — Commerce Department Plans — Statement by 
Secretary Redfield — Aid for Industry — Bureau of 
Standards — Bureau of Foreign and Domestic Commerce — 
Conservation Division — Mr. Lloyd George on the Changed 
Conditions — The Rule for Success — Rights of Capital 
and Labor — Both Must Receive Increased Recognition. 



PART II 
THE SCIENTIFIC METHOD IN COMMERCE 
I For a New Moral Code 101 

Men's Sensibilities Dulled by Revelations — German 
"Science" of Commercial Expansion — Others Have 
Studied in Same School — Prospect of Germany "Coming 
Back" — Her Real Purpose in Bringing America into the 
War — German Business Men to Lead Government — 
Frightfulness in Commerce — No Sign of Change of Heart. 

II Protection of American Trade 112 

Government Apathetic in the Past — American Interests 
Attacked With Impunity — Business Men Must Unite 
for Their Protection — Task Involves Work Administration 
Cannot Undertake — What American Trade Faces in the 
Future — How Germany Stands Industrially. 

III Germany's Peace Plans During War . . . . 117 

Open and Underhand Methods — Transition Economy — 
Institutions for Industrial Concentration — Raw Materials 
and Shipping — Foreign Exchange — Germany's Continued 
Power in Foreign Countries — Organisation Needed to 
Meet Organisation — German Methods Differ in Different 
Countries. 

IV How Countries Were Exploited ......124 

Denmark's Free Port — Germans Used It to American 
Detriment — How the Dye Combine Imposed Itself 
on France — Italy Still in Danger of German Clutch — 
Turkey and Russia Under German Economic Domina- 
tion — Rights Abroad Which American Business Has 
Now Acquired by Actual Purchase. 

V The German Cartel 131 

The Science of Industrial Combination — The Cartel 
Developed by Evolution — Government Enters as Partner 
— Dumping Carried Out with All the Power of the State — 
When German Locomotives Were Imposed on Italy and 
France — Foreign Imitations of American Machinery — 
Agriculture Also Preyed Upon. 

VI The "Chain" Method of Expansion . .... 140 

Concentration of Industries Facilitated Expansion Abroad 
— Germany Controlled Foreign Enterprises through a 



viii CONTENTS 

CHAPTER PAGE 

Minority Interest — Great Corporations Started a "Chain" 
Which Constantly Lengthened — How Local Owners Were 
Ousted from Own Properties — The "Chain" in Italy. 
Spain, France and Other Countries. 

VII Concealing Economic Strength 147 

The Foreign Visitor's Experience at Krupps — Keep-Out 
Signs Elaborately Courteous — German Industries Under 
Careful Watch — Difference of American Methods — 
Development of Central Europe Carried on Quietly — 
Important River and Canal Works and Shipbuilding. 

VIII Germany's Banking System 154 

Forced Growth of German Banking — Capital Mobilised to 
Catch Up with Commercially Older Countries— Com- 
parison with English, French and American Systems- 
How the Six Great Banks Grew — Government Representa- 
tives Made Directors — Oil Stock Promotions and Bank 
Rivalries — The Grossbanken and the Great Industrial 
Corporations. 

IX German Banks Abroad 164 

Economic Theory of the Foreign Bank — Characteristics of 
the German Banks Abroad — Value of State Direction — 
Prestige of the German Great Banks Utilised — Banks 
Founded with the Foreigner's Money — Silent Partnership 
Arrangement with American Banking Houses — Experi- 
ences of American Business Men Who Dealt with Them — 
Even Blackmail Resorted to — The Banking Web Around 
the World. 

X The Spy System in Trade 176 

Secret Service Methods Systematically Employed — 
Experience of an American Agent in Germany — The 
German in France Possessed of Private Trade Details — 
Investigation of the German Practices — The Military 
Commercial Traveller — Demand That German Ways Be 
Mended. 

XI Influencing the Press 184 

Court Martial Exposes German Ways of Press Corrup- 
tion — German Female Spy Marries Pre-Selected Italian 
Sailor — She Handled Newspapers — Publicity Organisa- 
tion of German Corporations — Denounced as " Corruption 
Agency" — Socialist Internationale Used as Intermediary. 

XII To Protect" American Products 190 

The Distinctives of Merchandise — Germans Systematically 
Appropriated Those of Other Peoples — "Vienna" Hand 
Bags Made in Germany — No Business Too Trivial for 
Imitation — Incident of the "American Saints" in Mexico — 
United States Products Particularly Exposed to 
Appropriation. 



CONTENTS ix 

CHAPTER PAGE 

XIII Bribery in Trade Promotion 196 

Mystery of American Trade Misfortunes Abroad — 
Sabotage a Typically German Weapon — Italian Premier 
Denounces Bribery — When Krupps Were Exposed — An 
Apology for Commercial Immorality — How Shimmelpfeng 
Credit Agency Obtained Its Famous Lists — German 
Professors as Corrupters in Italy. 

XIV How to Keep American Industry American . . 207 

Revelations of Extent of German Commercial Domina- 
tion — Consideration of Measures That May Prevent 
Repetition in Future — British Plans for Protecting Trade 
— German Metals Company Controlled World's Markets — 
Incident of St. Andrew's Bay — For a Monroe Doctrine 
of Commerce. 



PART III • 
WORLD PLANS AND FOREIGN TRADE 
I European Outlook on the New Era 217 

Old Individualistic System of Trading Has Gone — 
Governments Will Participate in Industry and Trade — 
Self-Sufficiency as a Political Necessity — Control of 
Materials — Protection of Key Industries — General Agree- 
ment Reached at Paris Economic Conference. 

II Great Britain 220 

Extensive Plans Already Matured — Ministry of Recon- 
struction Has Started New Era Projects — Combination 
in Banking and Industrial Corporations — Report of 
Committee on After- War Policy — Government Assistance 
to Certain Industries — British Labor Party for National- 
isation Scheme. 

III France 230 

Reconstitution of Devastated Territory is Chief Concern 
— Labor Disturbed by Syndicalist Doctrines — Project 
of National Economic Council — America Regarded as 
" Guardian Angel " — Expectation of Co-operative Service — 
The Principal Needs of France — Government Proposes 
National Federation of Employers. 

IV Italy 240 

Restriction of Emigration — Intended that Italian Workers 
Abroad Shall Be Skilled — Industrial Development in 
Italy — Declaration of Rights by Business Men — Industrial 
Association Issues Proclamation — Capital Will No Longer 
Tolerate Unequal Conditions — Italy an Inviting Foreign 
Market — Danger of German Penetration Again Threatens. 

V Germany . 257 

Twofold Function of Ministry of Economics — An Export 
Trade Organisation Formed — Bureau for Re-establishing 



x CONTENTS 

CHAPTER PAGE 

German Prestige and Commerce Abroad — New Intensive 
Study of Foreign Countries with View to Trade — Expected 
Nationalisation of Many Industries — How Germans Expect 
to Retrieve Their Losses. 

VI Foreign Trade Service 261 

State^Department Proposes Consular Increase — To 
Make Service Strictly American — New Economic Experts — 
Better Pay for Consuls— Overwhelming Duties Imposed on 
Them — Foreign and Domestic Commerce Bureau to 
Expand — Valuable Services Which It Renders — To 
Explore Foreign Areas. 

VII America's Representation Abroad 269 

Demand Abroad for Reform of Diplomacy — Bureaucratic 
Methods to Be Modernised — Economic Rather Than 
Political Representation Desired — Proposed Directive 
Council at Home — Specialists to Control Its Sub-Divisions 
— The Tests for Foreign Representatives. 

VIII National Publicity . . . 274 

A Form of Propaganda Being Widely Adopted — Foreign 
Offices Generally Had a Publicity Bureau — How Austria 
Profited by Hers — German Business Men Originated New 
Scheme — Economic and Political Publicity — Important 
That Work Hereafter Be Above-Board — Publicity to 
Promote Industrial Peace. 

IX America's Need for Foreign Trade 283 

Adventitious War Trade Developed Production Capacity — 
Our Normal Market Outgrown — New Outlets Needed — 
Latin America Generally Counted On — South Africa and 
Australia — America Practically Pledged Not to Usurp 
Foreign Trade of Allies. 

X American Ships Available for Commerce . . . 287 

Widely Varying Statements Regarding Tonnage — Erro- 
neous Impressions Widespread — Mr. Schwab's Figures — 
Forecasts Will Not Be Realised — Our Effective Ocean- 
Going Tonnage — How World's Shipping Has Deteriorated 
— Wear and Tear of War and Inferior Construction-^- 
Falling off in Construction. 

XI Education for Foreign Trade 294 

British and German Methods of Approach — Democracy in 
Commerce — An American Policy Should Be Formulated — 
Training Must Begin in School — Foreign Trade Is Estab- 
lished Slowly — Two Years to Get Results, Five to Found 
Permanent Market. 

XII Our New Obligations to the World . . . . . 303 

Duties That Accompany America's Financial and Com- 
mercial Supremacy — Warnings Against One-Sided Trading 
— America Must Supply Food, Materials and Credit — 



CONTENTS xi 

CHAPTER PAOB 

Will Be Expected to Invest in Foreign Securities — 
Problems of Relations with Other Peoples — Business Men 
the Natural Leaders in Difficult Times. 



PART IV 
AN ALTERNATIVE FOR FOREIGN TRADE 

I DEVELOPMENT' OF THE HOME LAND . ) . . . . 307 

A Rare^ Opportunity Offers — Replace the War Urge with 
a Peace Urge — Scheme of "Beautiful America" — 
Problems of the Hour Would Vanish — How United People 
Can Work for General Betterment — All Humanity 
Would in This Way Be Benefited. 

II Prompt Action Needed 318 

Conditions Now Ripe for New Great Undertaking — 
American Industries Are Pausing Before Fresh Start — 
Home Trade Versus Foreign Trade — Financing Needed 
in Either Case — Machinery Manufacturers Preparing! 
Campaign — The Most Desirable Purpose in Planning 
Public Works, 



PART I 
AMERICA'S NEW ECONOMIC STATUS 

CHAPTER I 



THE BUSINESS MAN'S ERA 



The Business Man Coming into His Own— The Politi- 
cian's Influence Wanes — Where Power Rightfully Be- 
longs — Ancient Civilisations Compare Poorly with 
That Which Business Enterprise Has Brought — War 
Inspired Industry with Disposition to Resist Oppres- 
sion—Its Spirit of Pacifism Is Gone. 

"The Business Man's Era." Will this be the title 
which the future historian will place over the new chap- 
ter that now opens in the story of the peoples? The 
most striking phenomenon which he is apt to consider 
in the period on which we are entering is the sudden 
ascendancy of the industrialist to power. The war start- 
led the business man to a realisation of what a poor job 
was being made of the governing of empires, kingdoms 
and republics — quam parva sapientia regitur mundusl 
What little wisdom was being shown in the government 
of the world, in our day as thousands of years ago. The 
world had not advanced much in the matter of its gov- 
ernment. War, and a "commercial" war at that, was 
sprung on it before business men had an inkling of what 
was going on. 

13 



14 AMERICA IN WORLD MARKETS 

With the coming forward of the business man the 
future historian will have observed the demagogue on 
the defensive, the politician being elbowed off the stage. 
Stupendous problems were brought up by the war and the 
politician was powerless to handle them. Only men of 
enterprise, energy and decision were qualified to deal 
with these problems. And such men fortunately were 
the business leaders. Had they been in charge there 
would have been no war. If the politicians had remained 
in charge where would the world be after militarism and 
Bolshevism and the other scourges had run their course? 

Business men have been showing a vague, inchoate con- 
sciousness of their own real strength, which gradually 
seems to be developing into a definite conception leading 
them to an assertion of their rightful influence in the 
direction of the Nation's affairs. Who, they may ask 
themselves, are best qualified to handle the great ques- 
tions of the hour? Who should have the chief voice in 
settling contentious matters of international importance 
— the working form of the League of Nations, the right 
to the development of sea power, and others that may 
profoundly affect the whole future welfare of the coun- 
try? Which is best equipped to instruct and educate 
the people on subjects of vital moment — the politician, 
whose chief anxiety is to follow his followers, to inter- 
pret "his district," to encourage their want of knowledge 
and even to flatter their lack of patriotism, rather than 
to lead, or the business man who by the very force of 
conditions is constantly driving onward, ever forward? 

Who, more than the business men, have contributed to 
the well-being of the greatest number? Who else have 
it in their power to bring about the Utopia, to make life 
better worth living for the whole people — what the poli- 



THE BUSINESS MAN'S ERA 15 

tician promises, but has it not in his power to perform — 
to increase the prosperity of the Nation, to impart the 
most vigorous impulse to the progress of civilisation ? 

The ancient Athenians had temples and masterpieces 
of sculpture to rejoice their aesthetic eye, a system of 
polity to satisfy their aspirations for freedom, and they 
may have thought it the acme of mental entertainment 
to listen under the porticos to disquisitions on metaphysics 
by the philosophers and the sophists. They attained a 
notable degree of culture which, like that of other peoples 
of the past, has often been held up to us for our admira- 
tion and in disparagement of our own methods and pur- 
suits, of our own civilisation. 

But where was the civilisation of these ancients, in any 
true sense of the word, if their dwelling places were win- 
dowless and dark; if they slept on the ground on rugs; if 
their food consisted of a few ill-cooked viands; if the 
winter wind eddied around their bare legs and spiralled 
up along their bodies under their loose woollen shirts and 
coarse over-drapes? The world undoubtedly would be 
poorer without the almost divine morality of Socrates, 
without the Belvidere Apollo and the Laocoon, without 
the poetry and drama and oratory of Hellas. But, with 
all that the ancients have left us, where would the world 
be to-day without the spiritual courage, the enterprise 
and the zeal of the manufacturers and merchants of our 
modern times, without the true business spirit that devel- 
oped the mariner's compass, that discovered America, 
that invented printing, that led up to the electrical age in 
which we live? It would be back still in darkness and 
semi-savagery, for men are cruel and heartless when, the 
world is poor. The producers and doers of the business 
world have been the true heralds of civilisation. They 



16 AMERICA IN WORLD MARKETS 

are the benefactors, for it is they who have led us into 
the era of light and of comfort. 

As the doers in one realm of social activity, the men 
of business had not thought of their capacity to be the 
doers in the other principal fields. The war opened their 
eyes. It showed them that not only politics and war- 
making and the social fabric generally are fundamen- 
tally dependent on them, but that, unless they themselves 
take a direct hand in it, there cannot be success in mod- 
ern politics, or in war, or in keeping any great phase of 
human activity going. 

The war inspired new feelings, including an increased 
spirit of courage, a disposition to fight, to smash oppres- 
sion. Business men had suffered from oppression — on 
the part of the self-appointed statesman, the poli- 
tician and the demagogue, who for selfish reasons had 
kept the fires of strife and contention glowing, and at 
times also, they complained, on the part of others, in- 
cluding occasionally such specialists as the lawyer and 
the banker, who made the path of business difficult. 
Too many were assuming the right to dictate to it. 
Business had stood for being browbeaten ; it had become 
to some extent affected with a spirit of pacifism. But 
oppression will no longer be tolerated. The day of paci- 
fism is gone by forever. Business men hereafter will 
stand up for their rights. 

And so our future historian, as he contemplates the 
new chapter — the chapters on the rule of the patriarch, 
of the despot, of the monarch, whether Caesar, king or 
military captain, and of the lawyer-politician being defi- 
nitely closed — may, perhaps, intimate that he expects it 
to remain open indefinitely. 



CHAPTER II 

SHARES IN WINNING THE WAR 

The War Was a Commercial One at Least in Its Finish 
— World's Greatest Military Power Proved to Be In- 
dustry — A Foreign Tribute to Share of American 
Business Men — Those Who Have Proven Title to 
Leadership— Rights of Business Will Be Asserted. 

It has often been stated that the late war was a com- 
mercial war in its origin. It certainly was a commercial 
war in its finish, for it was in the designing room, the 
laboratory and the factory that it was won more than in 
the field. In other words, it was no mere war. Some 
more adequate term should be found to indicate the 
colossal struggle of nations against other nations in 
which all the resources of men, machines, raw materials, 
manufactured products, human energy of every kind 
were assembled and exploited with demoniacal energy. 
The word "war" is utterly inadequate to represent this 
conflict, which was greater than we now realise and 
which, only through a certain vista in the perspective of 
the past, will begin to be adequately appreciated in its 
overwhelming magnitude. 

Germany was the world's greatest military power by 
her own claim and by the concession of a great many 
outsiders; but that greatest military power did not win 
the war. As a matter of fact Germany was not the 
greatest military power. The greatest military power 

17 



18 AMERICA IN WORLD MARKETS 

in the world to-day is industry. It is industrial power 
carried out to its fullest exploitation. As time goes on, 
business men will gradually come to realise that their 
share in the winning of the war was paramount. A for- 
eign statesman, in fact, has casually paid a pointed com- 
pliment in the matter to the business men of the United 
States. The noted Japanese envoy, Baron Nobuaki Ma- 
kino, delegate to the Peace Conference, passing through 
New York in January of this year on his way to France, 
referred, in a statement for the press, to "the American 
leaders of industry, trade and commerce, who have per- 
haps done more than armies or navies to win the war." 
The graceful remark was not uttered as a sententious ex- 
pression of opinion but as a casual announcement of fact 
which was to be taken for granted. And this is the way 
it will finally come to be taken by the business men of the 
United States. Gradually, they will realise that in the 
day of the nation's crisis theirs is the predominant func- 
tion. Gradually, also, they may be expected to claim for 
themselves the elementary rights and prerogatives to 
which such an exalted position in the community entitles 
them. These probably will include the right to have a 
say in the administration of the nation corresponding to 
their status in it and the right to refuse to have their vital 
interests, their industries and the off-shoots of their in- 
dustries regulated in any high-handed way by those in the 
community whose status, when measured on any justifi- 
able basis, is lower than theirs. 

The leaders of American industry and commerce will 
not, of course, seek to have the national administration 
vested in their particular class. That is not the point 
What they may be expected to do is to claim a due and 
equitable share in the direction of public affairs and in 



SHARES IN WINNING THE WAR 19 

deciding policies that refer to their own special con- 
cerns. The test of war has shown that to them must be 
entrusted the direction of vital interests in the hour of 
crisis, and it would be absurd to expect that they should 
yield up all control of them the moment the crisis has 
passed. 

Leaders in business are leaders by proven title. Bitter 
feelings have stirred the business world on account of 
the undue domination of others, and allusion has often 
been made to undeserved control in many respects on the 
part of politicians, attorneys and office-holders. Not, 
be it remembered, that it is the sense of American busi- 
ness that those who fall into these classifications are out- 
side of American business, since, as a matter of fact, in 
cabinet and other offices are men of distinguished busi- 
ness ability who in every strict sense are business 
men, and among the lawyers and the bankers the same 
fact is verified. But the intensity of the feeling that 
business has too often been differentiated against and 
that the lawyer, the politician and the banker are among 
those who too often have made the path of industry and 
commercial development unnecessarily difficult, can be 
lessened only by the exalting of business to its true rank 
in the direction of the national affairs of the community. 



CHAPTER III 

CONGRESS OF BUSINESS MEN 

The Gathering at Atlantic City — How Future Con- 
gresses May Be Conducted — Things to Be Taken for 
Granted — Action and Decision on Action Their Proper 
Function — Those Who May Participate — Workers 
Also Are Industrialists — Others Who Merit Title of 
"Honorary Business Men." 

American industries took a notable step forward in 
their own interest in 191 8, when in the month of De- 
cember they showed they could act as an organised whole 
by meeting in congress at Atlantic City. The War In- 
dustries Board had prepared the way for this by forcing 
American manufacturers to get together, by making men, 
who never expected to do so, shake hands with one an- 
other and sit on opposite sides of the same table and 
discuss questions vital to themselves in a frank and open 
way. 

The four days of the Atlantic City congress were con- 
sumed in the holding of fractional meetings to discuss 
questions affecting individual industries and groups of 
industries, and general meetings to listen to addresses by 
selected speakers and in voting on the resolutions picked 
out and condensed by a Clearance Committee from the 
multitude of more or less elaborate resolutions proposed 
by the groups. 

Perhaps this Congress of the manufacturers' and mer- 

20 



CONGRESS OF BUSINESS MEN 31 

chants' side of industry and commerce could not have 
been got together if its programme had not been planned 
in accordance with the programme more or less generally 
established for conventions. The great outstanding ad- 
vantage of the congress was indicated in the simple 
fact that it had actually got together. A further advan- 
tage exists in the fact that it showed a way for utilising 
subsequent congresses of the kind for specific action that 
can be of material benefit to American industry and com- 
merce united as a whole. 

It is clear that the next time that American business 
meets in congress, the fruitless time-wasting features of 
the average convention will have to be eliminated. Indi- 
vidual industries and groups of industries can hold their 
special meetings in advance, so that their representatives 
may reach the congress ready to take part in it as a con- 
gress. 

There is much also that must be taken for granted in 
behalf of the delegates to such a congress. It will have 
to be taken for granted, for instance, that they are fa- 
miliar with the great questions of the day and the prob- 
lems of industry and commerce; that they do not need 
to be lectured to at great length on ethical topics; that 
they are men of action and decision and that if they 
assemble in a business congress they expect it is for the 
taking of action in matters affecting business, so that 
every meeting of the congress may be a landmark in busi- 
ness progress. The presence of notable personages as 
speakers undoubtedly lends prestige to a gathering and 
such personages are to be presumed to have with them 
a message of importance. But, as the time for such a 
congress is necessarily limited, long addresses on special 
subjects could be distributed in advance, instead of being 



22 AMERICA IN WORLD MARKETS 

read to the congress, and the messages of importance 
could be gathered by the Clearance Committee and made 
available for those assembled without encroachment on 
the time available for the vital and essential work of 
the congress. 

Resolutions, even though more or less anodyne, and 
trimmed and pared to conform to all views and to get 
by expeditiously, probably have some real effect. But 
the purpose of a congress of business is action or deci- 
sion on action. Action in the interest of business as a 
whole; not the mere formulating of resolutions, but the 
taking of steps to follow up or carry out resolutions; 
not merely the deciding on plans, but the execution of 
them; this must be the aim — to turn effectively to ac- 
count the quite extraordinary advantage of being able 
to gather American industry and commerce into a con- 
gress. 

Those who organised the Atlantic City Congress have 
put American industry under a debt of obligation to 
them. It is to be hoped that they will continue the 
work and organise other congresses. Perhaps they may 
find it possible to go further and to bring into a single 
congress all the essential elements of our business life, 
all who are industrialists, the workers of industry and 
commerce as well as the manufacturers, merchants and 
financiers. 

And here again there would be much that should be 
taken for granted. For instance, the American worker 
need not be lectured to, any more than the manufac- 
turer. It may be taken for granted that he too is fa- 
miliar with fundamental questions of the hour, that he 
has been keeping pace with developments, that he is 
ready to consider action and that, satisfied with the fair- 



CONGRESS OF BUSINESS MEN 23 

ness and equity of the plans proposed, he will lend his 
efforts to promoting the benefit of American business. 
Let it be taken for granted that he is not so terribly sen- 
sitive about his status as a worker, as is sometimes imag- 
ined ; that it can even be alluded to without his sensibili- 
ties being wounded. He will be open to conviction that, 
as a matter of fact, all engaged in industry have the 
right to be regarded as workers. Were this not the case, 
there might be the expedient of putting overalls on the 
whole hierarchy of a manufacturing business, on the 
president and treasurer, on the executive force and on 
the office force, as well as on the men at the machines. 
No absurd action, however, is necessary, but only com- 
mon sense and tact and frank and friendly advances 
toward him, to weld the worker into the common bond 
and to satisfy him that the intriguing politician is no 
less his enemy than the enemy of the head of his con- 
cern and that his interests are the interests of the in- 
dustry as a single entity. 

One thing more that may be taken for granted, with- 
out further explanations, is that there are statesmen, 
lawyers, officials, bankers, "professional men" of many 
kinds who have deserved well of industry and commerce, 
who consequently merit the conferring on them of the 
title of "honorary business men," and who accordingly 
might rightfully take their seats in a congress of busi- 
ness. 

It is a reasonable subject of reproach that men rec- 
ognised as business leaders have of late been dealing all 
too lavishly in hypothetic optimism, announcing publicly 
that prosperity is ours in permanence, if only business 
men will co-operate, if capital and labor will get to- 
gether, if production is pushed, if foreign markets are 



24 AMERICA IN WORLD MARKETS 

taken over, if the wheels are kept turning, wages kept 
high, and unemployment abolished. They advance no 
concrete word of counsel as to how all these desirable 
ends are to be made an actuality. The congress of busi- 
ness can well take up the practical constructive work 
involved in bringing about the desirable changes, of pro- 
jecting into peace times some of the war-time policies 
and achievements. 

We have been told of late through responsible organs 
of publicity that the country is "legislatively bankrupt," 
that it has a "Congress of pigmies," that "the people do 
not rule in the United States to-day," that "a people who 
have just decided the destiny of the world now find them- 
selves without the capacity to set their own house in or- 
der." If this is so, what part of the blame falls on Ameri- 
can business men? Again we are fortunate in having 
this congress of business, which can step in, as an organ- 
ised, or at least an organisable, body, and take up the 
responsibilities that rightly fall on business men, supply- 
ing deficiencies, co-operating in and supplementing the 
work of the Congress of the Nation. 



GHAPtER IV 

THE RIGHT OF COMBINATION 

Combination Was Essential to Victory — The Handicap 
of Restrictive Laws — Advantages and Possible Dan- 
gers of Industrial Union — Business Men Best Quali- 
fied to Work Out the Solution—- Union Needed to Alle- 
viate Unemployment — How the Creation of New In- 
dustries Is Promoted — Price "Stabilisation/* 

Among the great practical gains which the mobilisa- 
tion of American industries during the war has effected 
is the lesson which it has taught for the elimination of 
wasteful methods and practices and the establishment 
of American industry and commerce on a high plane of 
scientific system. The wastefulness of competition, as 
it was carried on in this country, proved to be appalling 
in its extent and in its injury to American business and 
to the welfare of the American people. It was nobody's 
business, however, to bother about it, until the war came 
and made it everybody's business. The first and most 
urgent remedial measure was to bring the industrial in- 
terests of the country together. 

Union and combination were the foundation of the 
great success achieved by American industry during the 
war. Sharply before the eyes of all who had cognisance 
of what was being accomplished, was sketched the irri- 
tating picture of the evils which can be caused by reck- 
less and sweeping legislative action on the part of those 

25 



26 AMERICA IN WORLD MARKETS 

who are without accurate or intimate knowledge of the 
inward workings of business. There are dangers, as every 
business man freely admits, from unrestricted power of 
combination in industry, as unscrupulous persons may 
use the combination for the purpose of restricting pro- 
duction and increasing prices and thereby working in- 
jury to the whole people. But to meet such a danger by 
applying the wholesale remedy of cutting off entirely the 
right of combination may mean a far worse injury in the 
long run to the nation's interests. In the day of compe- 
tition which we are entering that country would be under 
a grievous handicap which retained such laws as have 
been enacted in the United States, prohibiting the right 
of combination in industry and commerce. American 
business men have submitted to such laws with more or 
less good grace, chiefly because they have been intimi- 
dated from using their inalienable right of getting to- 
gether and determining on steps for their own interest 
and protection. 

A certain measure of combination, for the purposes of 
co-operation and co-ordination, is an imperative need of 
modern business for the best interests of the entire com- 
munity. If to a representative body of American busi- 
ness, instead of to politicians and lawmakers who lack 
the specific technical knowledge which the case requires, 
were left the decision on the measure of combination and 
co-operation in industry which would meet the need and 
which at the same time would obviate the dangers of price 
fixing and restriction of production, there can be no ques- 
tion but a satisfactory solution could be worked out 
which would meet all the requirements of justice and 
equity. 

The interference with the development of American 



THE RIGHT OF COMBINATION 27 

industry and commerce which prohibitive legislation 
against the right of combination brought about was not 
merely of a direct kind. Abuses and vexations of a 
secondary character flowed from the same source, and the 
general result was a blighting effect on American in- 
dustry. Germany was forging ahead with cartels and 
scientifically planned systems for co-operation and co- 
ordination — the principle of combination being in certain 
industries pushed to the point of concentration, enforced 
syndicalisation — while American industry was writhing 
in bonds woven by American laws or by extravagant in- 
terpretation or application of laws. And now by every 
indication we are at the turning of the road with regard 
to the right of combination and co-operation in industry. 
The one thing long needed in our industrial life, the get- 
together habit, has been made an actuality. 

The war showed that union meant more work, better 
plans for work, better methods of distributing work. 
When the question of unemployment is so serious, it 
would be criminal not to profit by the lesson. 

If the creation of new industries is a vital need, let it be 
remembered that it is by unity and co-operation that new 
industries are quickly planned and created. 

The necessities of war caused the enforced bringing 
together of industries. The necessities of peace may de- 
mand no less. 

A special committee of the Chamber of Commerce of 
the United States has reported a proposal for the modi- 
fication of the "Anti-Trust Laws," so that the uncer- 
tainties arising from the existing legislation may be 
dissipated, and for the formulation of "standards of 
general business conduct." For this purpose it has 
recommended that the Federal Trade Commission, with 



28 AMERICA IN WORLD MARKETS 

membership increased from five to nine, be constituted 
a supervisory body to administer such newly established 
standards. 

There is a tendency to avoid the word "combination." 
The right of getting together aimed at is being referred 
to as "co-operation" or "co-operative agreements." But 
the demagogue politician deals in words. "Co-operation," 
which he cannot but approve, will, if it suits his purpose, 
be labelled "combination," and condemned. "Combina- 
tion" is a fairly adequate word, seemingly the best under 
the circumstances, as its meaning is clear and business 
men understand it as getting together for the purpose of 
co-operative agreements for beneficent economic service. 
How the politician interprets it should not really mat- 
ter. 

As a nation we are combining with foreign nations. 
All the new important projects, political, administra- 
tive, commercial, are based on combination. The most 
practical decisions of the Peace Conference have been 
evolved in the economic field. Co-operative economic 
agreements are the solution of world problems. 

The British import restrictions on shoes have been 
modified to permit "fair competition" between British 
and American manufacturers. Yet in America co- 
operative economic agreements have been under the ban 
as if they were in their essence immoral. 

The action of the Department of Commerce, in con- 
junction with its new Industrial Board, in promoting 
"price stabilisation" by producers of what it calls "basic 
commodities," among which it includes steel, building 
materials, textiles and foods, is a significant projection of 
"war methods" into peace times. It would seem to be 



THE RIGHT OF COMBINATION 29 

a reasonable inference that agreements among producers 
cannot be inherently wrong and that, under the pressure 
of conditions and with proper supervision, their object 
may even be a measure of price fixing. 



CHAPTER V 

A NEW IDEAL OF COMPETITION 

Unnecessary Waste a Gross Injury to the Country — 
The Enforced Competition That Fostered Disloyal 
Trade Practices— War Industries Board Showed a 
New Way — Fair to Government and Fair to Indus- 
try — The Legislation That Is to Be Desired. 

When the representatives of American business met 
in Congress at Atlantic City it became gradually im- 
pressed on their consciousness that one particular note 
dominated all discussions, and that was — loud or latent 
in every notable speech or resolution — the demand for 
the emancipation of American industry and commerce. 
The shackles must be struck from business ; the throttling 
legislation must be relaxed or abolished. This was the 
substantial motive of long addresses and complicated 
proposals. 

The chief aspiration of American business, assembled 
for the first time in a great representative gathering, 
speaking for the first time as a whole — speaking in a 
rather subdued tone, it is true, as if not yet conscious of 
the great strength it had acquired through acting as a 
whole — was for freedom. Freedom in the interest of the 
nation as well as in its own; freedom to do good, not 
license for evil ; freedom, but under every reasonable re- 
straint that might assure its use for upright purposes. 

When "restrictions on trade" were spoken of, and 

30 



A NEW IDEAL OF COMPETITION 31 

these were constantly recurring words, the demand for 
freedom was implied. In negative expression there was a 
very positive concept. Removal of the restrictions of 
trade imposed as a war-time measure was considered a 
matter of minor emergency compared with the imper- 
ative need proclaimed for the ending of the legislative 
restrictions that had hampered industry in America for 
so many years. These restrictions had been potent for 
evil, not merely as fostering wanton waste of resources, 
but also as opening the door to despicable commercial 
practices by the crafty and the unscrupulous. They had 
led to unfair competition — "disloyal" competition is the 
term the French use — one of the most disheartening evils 
with which the loyal business man has to contend. Leg- 
islation denied him the right to reach agreements with 
his fellow business men to combat those unfairly profiting 
by the opportunities which the legislation made possible. 
A new kind of competition is acclaimed as the right of 
American business, and as an urgent necessity of the 
whole American community in entering a new economic 
era. The manufacturer who has high standards to up- 
hold, the producer who teaches the public the merits of 
honest goods, the dealer who, in his spirit of self-respect 
and in his instinct for good merchandising, handles the 
standard grade wares, have too long been subjected to un- 
fair and unnecessary burdens, to wasteful losses, to tjie 
penalties that trickery and chicanery have been able to im- 
pose. The experiences of American business during the 
war, under the direction of the War Industries Board, 
have shown that these losses and burdens, far from being 
anything like "necessary evils" as they had sometimes 
been described by the unthinking or the interested in the 



33 AMERICA IN WORLD MARKETS 

days of peace, are in reality a detriment to the best in- 
terests of the country. 

"That a new and better epoch of competition will be 
inaugurated as a result of what we have learned through 
the war, there is hardly any reason to doubt," Mr. D. R. 
McLennan, Chief of the Non-War Section of the War 
Industries Board, said to me on this subject. "The 
Board was created to make possible the successful prose- 
cution of the war. It called in business. It ignored the 
Sherman law. It mobilised the industries ; it made them 
combine. The result showed to what an enormous ex- 
tent waste could be curtailed, how tremendously the busi- 
ness interests of the country could be benefited. 

"The industries are eager to do permanently for them- 
selves in peace what the Government did for them in 
war. They are looking for legislation to make it pos- 
sible for them to combine in curtailing waste, to combine 
in the public interest. They will not, of course, seek the 
right to combine for the purpose of price fixing. Stand- 
ardisation and efficiency are goals towards which they 
aim, not a standardisation that could possibly imply any 
restriction on the development of methods of production, 
but such standardisation as makes for the abolition of 
waste, and as is now known to be a national economic 
duty. 

"The War Industries Board has shown how easy it 
is to be fair to the industries and at the same time to be 
1 fair to the Government. The Board was commended by 
both sides. Among the services which it rendered to the 
Government and to business, through the centralisation 
of industries, were the lessons it pointed out and em- 
phasised for the elimination of waste, the spirit of co- 
operation in the interest of industry and of the general 



A NEW IDEAL OF COMPETITION 33 

public, better relationships among manufacturers, the im- 
portance of industry organising under suitable control, 
the desirability of modernising manufacturing processes. 

"Manufacturers, we now realise, should have easy ac- 
cess to some judicial body in which they could place full 
confidence and which would be in a position to inform 
them authoritatively regarding their rights in combining, 
in reaching agreements and in taking action generally 
for the stabilising of their industry." 

Other men, who had served on the War Industries 
Board and who were among the speakers at Atlantic City, 
indicated that the one lesson which should not be lost 
was that the getting-together of the industries, their col- 
laboration and spirit of unity were essential to the prog- 
ress of the nation's commerce. 

"Whatever else the war experience has shown," said 
A. W. Shaw, Chief of the Conservation Division of the 
War Industries Board, "it has proved the ability of com- 
petitors to co-operate effectively and the willingness of 
the country to have them co-operate for the elimination of 
wasteful practices. It has shown that such co-operation is 
good for the country and good for business too. We 
have had two not altogether satisfactory kinds of busi- 
ness in this country — the extreme of competition on one 
side and the extreme of combination on the other. The 
first is wasteful and the second is open to well-known 
abuses, which the laws have tried to prevent. 

"If, now, you get a kind of competition from which 
the waste has been eliminated by counsel and co-operation 
among the competitors, have you not a more effective sys- 
tem than either of the extremes? This I think is what 
our war experience has been tending toward. I do not 
believe that co-operation to eliminate waste in the public 



34 AMERICA IN WORLD MARKETS 

interest violates either the letter or the spirit of the Sher- 
man Law, but I would suggest that Congress make a 
clear affirmation to that effect." 

The legislation that is generally looked for is legisla- 
tion that will take away from any outside agency the 
merely arbitrary faculty of saying to the business man 
what he shall do and what he shall not do. The busi- 
ness man wants to be let alone in exercising his Ameri- 
can prerogatives in his own particular sphere. 

With such a unanimity of feeling as has been mani- 
fested among those who can speak with competence it 
cannot be rash to forecast that the new competition, with 
the manufacturers organised for counsel and co-operation, 
will derive from a form of combination that can readily 
be kept within the bounds of legality and will be a form 
of competition better inspired and economically whole- 
some and sound. 



CHAPTER VI 

INDUSTRIAL LESSONS OF THE WAR 

Standardisation — Its True Meaning— A Middle Course 
Between Extremes — How Industry May Be Bene- 
fited — Danger of Preaching Abstractions. 

Business Courage — Its Absence Helps Wasteful Com- 
petition — How the Great Industries Showed Up Un- 
der Test— The Courage That Is Desirable. 

Conservation in Peace — War Policies Do Not Apply — 
Ill-Conceived Conservation Would Retard Progress. 

Cost Accounting — Lax Methods Lead to Waste— A Uni- 
form System is Demanded. 

Standardisation 

Of the lessons for industry which the war has taught, 
one has to do with standardisation, a word now in consid- 
erable vogue and in connection with which some strangely 
vague and indefinite advice is often tendered to the busi- 
ness world. The War Industries Board, in the course of 
its work for gaining the utmost efficiency of production 
of the materials requisite for waging the war, insisted 
on a generous measure of standardisation. 

Industry gained in the process. The agricultural ma- 
chinery companies freely delcare that it was a boon for 
them to have the thousands of varieties of tillage imple- 
ments they were manufacturing cut down to a few hun- 
dred. Wagon makers were able to drop hundreds of un- 

35 



36 AMERICA IN WORLD MARKETS 

necessary varieties of parts. The war vindicated the 
principle of standardisation. But that does not mean that 
the word should be made a shibboleth and the principle 
worked to death. It was a good thing in so far as it 
allowed products to be turned out on an economical basis 
and in so far as it put a ban on the making of varieties of 
products merely for the sake of varieties. In this sense 
it should be upheld and the changes which were brought 
about in war time should be continued. 

It has been estimated that where in an industry there 
were, say, 200 styles or varieties, forty per cent of them 
were being made at a loss. Elementary common sense 
teaches that at least those forty per cent ought to be sup- 
pressed. On the other hand, to go too far with standard- 
isation and to trim down styles and varieties so that 
nothing was left but the bald trunk of the tree, producing 
only the most primitive kind of products, would be even 
a worse sin than multiplying the unprofitable and wholly 
unnecessary varieties. 

Beneficent standardisation lies in between two ex- 
tremes. It is not something about which governmental 
authority can lay down laws and prescriptions. It is not, 
in fact, a matter for hard and fast rules. Common sense 
is the only guide, and each industry must be entrusted 
with the task of working out its own standardisation. It 
is not a case where advice from the uninformed outsider 
can do any particular good. 

It need hardly be added that standardisation takes no 
account of any suggestion for fixing or limiting the man- 
ner of turning out products. To imagine that there 
would be any gain in determining the number of varie- 
ties in a given industry, as well as the precise means by 



INDUSTRIAL LESSONS OF THE WAR 37 

which such varieties should be produced, would argue 
complete ignorance of the economics of industry. It 
would be a deathblow to progress. 

A form of standardisation is eminently desirable in 
broad lines of national development, but it should always 
be conceived and put into effect on the principle of mak- 
ing the widest allowance for improvements and in- 
novations. The day will probably come when we shall 
have a centralised standardisation body controlling and 
directing subsidiary standardisation committees, which 
compile information and formulate rules and suggestions 
for the guidance of individual industries and spheres of 
work. Such a body, co-relating the development of in- 
terdependent industries, could greatly facilitate national 
progress. The unnecessary duplication of effort, and the 
waste involved in work on projects that could not "fit 
in," would be avoided. Industries and inventors would 
have available to them a knowledge of the direction 
along which development is needed and of the projects 
that are practicable and worth while. 

The evils that standardisation undertakes to remedy 
grew out of wasteful competition; the benefits of stand- 
ardisation, in a somewhat different sense, are in the co- 
ordination of industrial effort. 

It is one thing, however, to urge on manufacturers 
a specific standardisation which they understand, and 
quite another thing to talk standardisation to the great 
body of the public. 

There is a fairly general impression that, as a result 
of war exaltation, we, as a people, are now in a sacrificial 
mood. Prohibition is pointed to, as the instance, and 
some preaching economists are urging standardisation, 
as well as thrift and other "universals." But they should 



38 AMERICA IN WORLD MARKETS 

realise that standardisation as a general doctrine can be 
actually dangerous and baneful, that a wholesale re- 
duction of varieties may mean less goods, less turn-over, 
smaller production, fewer wheels turning; less employ- 
ment, lower wages, cheaper and worse living conditions 
for a great part of the community. 

One of the drags on industry and commerce, a mill- 
stone around the neck of progress, has been this very 
standardisation; to the thinker it recalls the fact that 
civilisation is still hampered by lack of vision and imagi- 
nation and by timidity in enterprise. At the call for 
standardisation we could give up the luxuries, the im- 
provements and the refinements of our modern life and 
go back to the bald necessities. The gain, it appears, 
would be that thus we should save ; we should have money 
in our pockets. But, after all, what is money for? If 
we keep it in our pockets we are merely depriving our- 
selves of some of the satisfactions — none too numerous 
at best — of our brief and precarious chance at life. 

Standardisation in its essence is retrogressive. It 
means dropping things, going back. The puritans fas- 
tened a good deal of it on the race. We have long been 
standardised as to hats, clothes, shoes and in our mode of 
living generally. There are varieties, of course, but this 
is a case for the French saying to the effect that the more 
variety there is the more we still have the same thing. 
Hundreds of millions of human beings have been submit- 
ting passively for generations to the dictation of dead 
men who in their lifetime were certainly not distinguished 
for liberality of mind or for the spirit of ambition and in- 
itiative that makes for human progress. 

In the new era business men might well give less heed 
to the altogether too many "don'ts" and negative retard- 



INDUSTRIAL LESSONS OF THE WAR 39 

ing counsels that are so freely showered on them, and on 
the contrary should be inspired with a fresh enthusiasm, 
with the desire of new things, return novarum, in 
Caesar's phrase for "revolution." The revolutionary im- 
pulse for "new things" would indeed be a most desirable 
counter-agent for the kind of standardisation that has 
held the world back, and it would be an incentive to rapid 
progress and a stimulus to business and to better condi- 
tions. 

And so it would be well for business not to be too easily 
tolerant of the abstractions and generalities — to be ready 
to point out that standardisation is not per se a good 
thing, any more than is thrift or other vague and un- 
qualified concepts — lest a whole people, in more or less 
sacrificial mood, may be led to translate them into action 
in ways that may, not merely hinder progress, but have 
the effect of setting us back economically in serious and 
regrettable fashion. 

Business Courage 

One of the prime causes of wasteful competition was 
a lack of courage on the part of the producer. Another 
cause was a want of proper business methods, of a cor- 
rect cost system, of scientific forms of accounting. In 
the race for business, the manufacturer was ready to do 
anything rather than let an order escape him. He had 
not the nerve to say, No. He met his competitor's prices ; 
he poured out samples; he multiplied styles. One abuse 
followed another. Part of his business was profitable; 
part of it was run at a loss. He had not the courage to 
put the axe to the latter part. Often he did not realise it 
was a loss. As long as he was doing business, as long as 



40 AMERICA IN WORLD MARKETS 

he was making profits, he gave the matter no special at- 
tention. As long as the public paid and stood for it, he 
had not cared. 

We have not realised that by waste and uneconomical 
methods we have made prices increase; we have done 
the public a wrong. If we produced more economically, 
we should sell more goods and people would live better. 

Certain kinds of economies which we put into effect in 
the war-time search for materials should most assuredly 
be continued. It was found, for instance, that through 
the prodigal distribution of large samples, there was 
wasted in this way an average of nearly a whole yard of 
cloth for every suit made. It takes about three and one- 
quarter yards of cloth to make a suit. The saving made 
by going back to small samples of cloth means material 
for a million more suits of clothes a year. It was found 
that the business world was full of just such practices 
that were sheer waste. Nobody is harmed by cutting 
down the size of cloth samples or by the elimination of 
other unnecessary waste. The whole community is bene- 
fited by it. And remember that it was not through the 
War Industries Board or any other Governmental agency 
that this war-time reform was effected. It was through 
the manufacturers themselves. The Board called in the 
industries and asked how they could be put on the most 
economical basis to aid in the successful prosecution of 
the war. The industries told how it could be done and 
then the Board issued orders embodying the reforms sug- 
gested and these orders were mandatory. Two hundred 
and fifty great industries were involved. 

The great industries of the country showed up well 
under the searchlight which the Government's war or- 
ganisations were able to turn on them, surprisingly well 



INDUSTRIAL LESSONS OF THE WAR 41 

to the satisfaction of those who were familiar with the 
charges made against the big industries, of stifling com- 
petition, of repressing initiative, of frowning on new 
things, of shelving great inventions, of standardising to 
the point of keeping the industry unprogressive and sev- 
eral laps behind similar industries in other countries. 
Any one acquainted with the standing among the nations 
of American industry and its unrivalled reputation for 
keen initiative and untiring progressiveness must know 
that rash accusations of this kind did not deserve much 
consideration, and under the test it was seen that there 
was very little foundation for them. There was a notable 
degree of healthy standardisation in most of the great 
unified businesses, and at the same time a policy of active 
encouragement, of evolutionary development, and a con- 
stant reaching out for the newest and the best. 

The war rendered a distinct service in reviving busi- 
ness courage, an asset of enormous value to industry. A 
collective examination of conscience might reveal many 
ways in which business men have sinned through the vice 
of pusillanimity. In the coming days the business man 
who cannot goad his soul to vigorous emanations may 
entertain some just apprehensions, for the prospect is 
that wobbling and indecision will be peculiarly dangerous 
and that courage, calm and serene, will be in demand. 

Industry, we are told, is on the eve of a great change. 
If the predictions of all those who have been warning 
us about it were realised, it would not be a gradual, 
natural and desirable change, but a bursting of dams, a 
sort of cataclysm. The manufacturer who, when con- 
templating such a possibility, was conscious in his 
thoughts that he succumbed to the flood, who showed 
no fight, who put up no struggle in his own behalf and 



42 AMERICA IN WORLD MARKETS 

in that of his country, who failed in self-assertion and 
did not keep repeating that he was the master of his 
fate, the captain of his soul, might safely consider him- 
self predestined for disaster if the dams ever did break. 
The prophets of evil may be all wrong — probably they 
are — but the possibility of trying days to come ought to 
spur business men to whet their courage. 

Conservation in War and Peace 

War-time conservation of course was quite a different 
matter from conservation in time of peace. The former 
was strictly a war measure, and economies were made 
obligatory for one sole purpose, the winning of the war. 
The policies that determine conservation in peace can- 
not therefore be based on the war conditions. Thus, for 
example, while the Conservation Division of the War 
Industries Board was successful, by getting together 
with the authorities in Paris and with leading dress- 
makers in America, in bringing into vogue a narrow 
skirt for women, with a hem measurement of only about 
a yard and a half, while the trend of fashion at the 
moment was towards a skirt nearly twice as wide, it does 
not follow that economy of that kind should desirably 
be made permanent. 

Conservation and economy, ill conceived, might be a 
serious danger to business development and to prosperity. 
We could limit our needs, we could live frugally, we could 
dress in shoddy, we could walk instead of ride ; but that 
would be going back, instead of forward in civilisation. 
It is important that the whole people grasp accurately 
the fact that there are extremes in economics which must 
carefully be avoided. 



INDUSTRIAL LESSONS OF THE WAR 43 

Cost Accounting 

As already stated, a cause of continued wasteful com- 
petition among manufacturing concerns is the lack of 
proper business methods in keeping accounts. 

If the manufacturer knew exactly, in hundreds, tens 
and units of dollars, what a given volume of his pro- 
duction stood him at a particular time, he would be far 
less likely to squander it in a competitive fight. Where 
he gazed at it, not as so much merchandise which he was 
letting go at a price which might or might not allow him 
to break even, or perhaps to make some profit, but in the 
form of dollars and cents which, when compared with 
the dollars and cents he was to receive in his sacrifice 
sale, showed positive loss, he might reform his methods. 

The successful business man does not throw away hard 
cash. Usually he would as soon take physical punish- 
ment as be mortified by being, confronted with figures 
that showed he was engaged in making ropes of sand, 
going through a farcical performance of purchasing, 
carrying and warehousing raw materials, subjecting them 
to a costly process of manufacture and selling them 
approximately at the price they stood him. A profes- 
sional expert going through the mummery of his profes- 
sion, but overlooking the one vital purpose for which he 
was engaged in that profession ! Those who held up for 
his consideration the figures that revealed the inanity of 
his undertaking could well deride him, and he must hang 
his head in confusion. 

Sometimes a manufacturer of this class will attempt a 
rejoinder. "When I let my wares go in this way without 
a profit/' he will say, "I consider it an investment in ad- 
vertising." But by a remark of that kind he is only con- 



U AMERICA IN WORLD MARKETS 

founding himself still more profoundly. For the adver- 
tising expert will show him with inexorable logic that he 
is merely abusing words, that the "advertising" he is thus 
taking to himself is the kind that will make him notorious 
and not famous, that he is advertising himself out of busi- 
ness instead of assuring to himself the rock bottom foun- 
dation of permanency. 

The expert accountant will show such a citizen that he 
is perhaps not making proper distribution of his indirect 
expenses, or that he is taking no account of economic ex- 
penses or of outlay under other heads, or that he is figur- 
ing percentage costs and percentage profit on the wrong 
end of the transaction, or committing some other accoun- 
tancy blunder. A proper system of cost accounting 
would be the red flag warning him of impending danger. 

It is, of course, an invidious task to assume to tell the 
manufacturer how to conduct his business. He may quite 
naturally retort that he himself knows his own business 
best; that if he does the uneconomical things, it is be- 
cause he is forced to it by the special conditions. And yet 
it is imperative that it be impressed on him that the waste 
must be compensated for somewhere — in loss of profit ; 
in higher prices; in lower wages; in inferior goods; in 
general injustice to the public. 

A resolution passed by one of the major groups at the 
congress of business men at Atlantic City declared, in 
its preamble, that "a proper cost accounting system is 
the only safe basis for the conduct of any business and 
the only effective restraint for ignorantly destructive 
competition." It called upon the Federal Trade Commis- 
sion to "take such steps as may be necessary to insure the 
adoption by manufacturers of satisfactory cost account- 
ing methods." 



INDUSTRIAL LESSONS OF THE WAR 45 

The equitable distribution of tax burdens is another 
imperative reason for seeking the establishment of uni- 
form systems of accounting among manufacturers. In- 
deed, suggestions have emanated from the Federal Trade 
Commission regarding the desirability of legislation to 
impose on American business a uniform system of cost 
accounting. 



CHAPTER VII 

NEED OF MORE POWER IN INDUSTRY 

Why the American Workman Is Unrivalled — More 
Power at His Service — Importance of Developing 
Water Power — Business Congress Adopts Resolution 
— What a British Committee Discovered — The Best 
Cure for Low Wages — Other Nations Alive to the 
Need. 

A realisation of the tremendous importance of 
abundant power for industry has been brought home to 
all the nations by the war. Failure to give due apprecia- 
tion to this subject was chargeable not merely to the 
general public and to the politicians; the leaders in in- 
dustry had not always shown themselves alive to its 
importance and economists as a whole had strangely over- 
looked it. 

We heard speculations regarding the day when the 
world's stock of coal would be exhausted, and those who 
did the speculating indulged in reassurances to the effect 
that, after the coal, we should have other sources of 
power supply, oil and the rays of the sun, and the ma- 
terials which the wizards of chemistry would put at our 
disposal, of which elements with mysterious endowments, 
like radium and helium, were the augury. 

It is odd that the vital fact that power in ever-increas- 
ing accumulation, power doubled, trebled and multiplied, 
power obtained easily and cheaply, is one of the prime 

46 



NEED OF MORE POWER IN INDUSTRY 47 

essentials of great industrial development, was not 
grasped or at least was not emphasised. People talked 
of "sufficient supplies," of "enough," when we should 
have been out seeking the superabundance. And so we 
went on using coal as our chief source of power, obtain- 
ing it with struggle and hardship, and often wasting vast 
quantities of energy in the mere handling, hauling and 
shunting of this source of power to the place where its 
energy was to be utilised, penalising industry by making 
it bear a huge burden which keen foresight and good 
economics might have spared it. 

Now, after the war has forced the nations to simple 
and accurate thinking on business questions, we know 
that it is urgent to provide for vast resources of power 
and to do so with a minimum. of labor and expense, and 
with all possible expedition. A striking concrete lesson 
has recently come to us. 

We have long been conscious that the efficiency of the 
American working man was notably superior to that of 
the worker in any other country. Results achieved 
proved it beyond question. The causes to which we 
ascribed this phenomenon were many and varied, but 
always illumined by our sense of patriotism. Recently it 
has been brought to our notice that the precise, the scien- 
tific reason why the American working man excels all 
others is because he has at his service fifty-six per cent 
more power than the working men in any other country 
in the world. In the countries where this fact is now 
understood, in England, France and Italy, the authorities 
are already engaged on the task of increasing the national 
provision of power at a vast rate. 

In America a campaign of education to make known 
to manufacturers, to legislators, to business men and the 



48 AMERICA IN WORLD MARKETS 

public generally the need of putting forth efforts to en- 
dow the country with greater provision of power was 
undertaken more than a year ago. It brought important 
results, although it was conducted within rather narrow 
limits. 

The source from which it is proposed to draw the 
vastly increased energy for industrial purposes is, it 
need hardly be added, water power, which abounds 
throughout this country. There is hardly a zone in the 
United States that is not directly interested in such a 
project, and it is one which in some measure concerns 
every single inhabitant. The mere modernising of the 
existing water-power plants, the installation of new and 
better machinery, would mean, it is authoritatively as- 
serted, an increase of at least 450,000 horsepower, an 
annual saving of several million tons of coal. 

More power implies greater facility in production, 
more opportunities of employment for those less endowed 
with physical strength — a desideratum that the war has 
emphasised — and more products. 

As a result of action by the War Conference of Busi- 
ness in 191 7, a referendum vote was taken among the or- 
ganisation members of the Chamber of Commerce of the 
United States on the question of seeking the immediate 
enactment of Federal legislation on water power. The 
vote in favor was 1,333, with on ty s * x nominally unfa- 
vorable. Later on the Sims bill was passed in the House, 
and the Shields bill in the Senate in Washington, both 
bills embodying substantially all the basic principles of 
the referendum reports and entrusting to a Federal Com- 
mission water-power jurisdiction with regard to public 
lands and navigable streams. More than half the unde- 



NEED OF MORE POWER IN INDUSTRY 49 

veloped hydraulic horsepower of the country is on public 
lands. 

Mr. Franklin K. Lane, Secretary of the Interior, has 
asked from Congress an appropriation of $200,000 to de- 
fray the expense of an investigation of the power supply 
of a special industrial region, that between Boston, Mass., 
and Washington, D. C. Had the war continued, Mr. 
Lane said, in a letter written in February, "it is certain 
that we should now be facing an extreme shortage of 
power." Forecasting an increased demand for energy, 
he continued: "If the country is to reap the benefit of 
this returning wave of activity, it must be prepared to 
furnish industry and transportation with an adequate de- 
pendable and economical power supply. Only by in- 
creased economy in the production and distribution of 
power will it be possible for our manufacturers to de- 
crease their production expenses and compete success- 
fully in the world's markets, maintaining at the same 
time the American standard of wages and living." 

The business congress at Atlantic City adopted this 
resolution: "Industrial activity is dependent upon the 
available supply of power. A bill which would affect the 
development of hydro-electric power upon waterways and 
lands which are subject to Federal jurisdiction is now 
before a committee of conference between the two Houses 
of Congress. It is important in the public interest that 
Federal legislation on this subject should be enacted 
without further delay." 

The British Ministry of Reconstruction and the Local 
Government Board are already putting into execution 
plans for more industrial power that were made as a con- 
sequence of the investigations and report to Parliament 
of the Coal Conservation Sub-Committee of the British 



50 AMERICA IN WORLD MARKETS 

Committee on Commercial and Industrial Policy After 
the War. Lord Haldane was chairman of the sub-com- 
mittee. The following extracts from its report are preg- 
nant with valuable information and with sound doctrine : 

"In the United States the amount of power used per 
worker is fifty-six per cent more than in the United 
Kingdom. If we eliminate workers in trades where the 
use of power is limited, or even impossible, we shall 
probably find that in the United States the use of power, 
where it can be used, is nearly double what it is here. 
On the other hand, not only are the standard rates of 
wages higher in the United States, but living conditions 
are better. There is little doubt that in the United States 
the average purchasing power of the individual is above 
what it is in this country, and that this is largely due to 
the more extensive use of power, which increases the in- 
dividual's earning capacity. 

"The best cure for low wages is more motive power. 
Or, from the manufacturer's point of view, the only off- 
set against the increasing cost of labor is the more exten- 
sive use of motive power. Thus the solution of the 
workman's problem, and also that of his employer, is the 
same, namely, the greatest possible use of power. Hence 
the growing importance of having available adequate and 
cheap supply of power produced with the greatest 
economy of fuel." 

Elsewhere the report says : "Indeed it is scarcely pos- 
sible to exaggerate the national importance of the prob- 
lem of a technically sound system of electrical supply, 
because it is essentially one with the problem of the in- 
dustrial development of the country, which largely de- 
pends upon increasing the net output per head of the 
workers employed in the industries in which power can 



NEED OF MORE POWER IN INDUSTRY 61 

be used." And again: "At the present time the supply 
of electricity in Great Britain is dealt with by some 800 
undertakings. The average generating plant capacity of 
those undertakings which have power stations is 5, 000 
horse power, or about one- fourth of the capacity of one 
single generating machine of economical size and about 
one-thirtieth of the size of what may be considered as an 
economical 'power station unit.' " 

The French Association for the Development of Pub- 
lic Works devotes a chapter of its report to the question 
of water power and indicates that it has arrived at con- 
clusions similar to those reached on the subject by in- 
vestigators in the United States and in Great Britain. 
The report deals particularly with the industrial prob- 
lems as they present themselves in France. It states that 
"the speedy utilisation of water power constitutes the 
best means of stimulating, without resorting to the im- 
portation of coal at ruinous prices, the development of 
public utilities and of great industries necessary, not only 
for the security, but also for the economic life of 
France." Dealing with the projected installation of 
water-power plants, it declares that "among all the under- 
takings designed to complete the nation's industrial equip- 
ment, there is no other which presents a character of such 
acute urgency or which appears capable of combining so 
effectively the assurance during war of the supplies 
necessary for the defence of the nation, and the repa- 
ration after war of the huge losses in labor and in capital 
caused by the war." The report proposes that the 
water-power projects be put into execution at the earliest 
possible moment, and that all obstacles standing in their 
way be swept relentlessly aside. 

Italy, handicapped by lack of coal, has been turning to 



52 AMERICA IN WORLD MARKETS 

profit her important resources in water power. She is 
now utilising about 1,000,000 horsepower out of the 
total of more than 5,000,000 which she could derive 
from her cascades and streams. Her hydraulic power 
is distributed all through the Peninsula from north to 
south, her most important industrial centres being in 
proximity to powerful water courses, usually with very 
rapid currents. In November, 1916, the Government 
appointed a Superior Council of Waters, comprising 
scientists and technical experts, whose duty it is to in- 
vestigate and report on all projects for the development 
of hydraulic energy. 

Italian experts are at work on the problem of drawing 
the fullest economical benefit from the country's water 
power, not merely by the generation of electric energy, 
but by the systematic co-ordination of all the practical 
uses to which that power can be turned. Thus 1,000,000 
hydraulic horsepower will save the country at least $30,- 
000,000 annually on imported coal. A like amount of 
power would permit new industrial development of 
great value. Four hundred thousand horsepower would 
save Italian agriculture some $20,000,000 on imported 
nitrates and imported grain. Less than 100,000 horse- 
power would effect a yearly saving of $8,000,000 by per- 
mitting the working of the magnetised iron deposits of 
the Valley of Aosta and the reduction of the importation 
of iron by some 65,000 tons. With 130,000 more horse- 
power 120,000 tons of pig-iron could be recovered every 
year from pyrite cinders with a gain of $2,600,000, and 
an extra 100,000 would serve for the treatment of 
Italy's zinc ores, of which 150,000 tons are annually 
mined and exported for smelting. The profit here would 



NEED OF MORE POWER IN INDUSTRY 53 

be $8,000,000. Hundreds of millions of dollars would 
thus be won for Italy every year. On her water power 
Italy counts for economic salvation and future indus- 
trial greatness. 



CHAPTER VIII 

SLANDERS AGAINST AMERICAN BUSINESS 

Tales Spread Abroad About "Commercial Corruption" — 
A Dr. Jekyll and Mr. Hyde Idea — Responsibility of 
Our Own Politicians and Organs of Publicity — A 
Charge Made by Mr. Gompers — Remedies Needed to 
Re-establish a Right Understanding. 

The good repute of American business is a subject 
that is likely to be of more and more interest to commer- 
cial organisations in the future. There is a feeling in 
many quarters that the foreigner must be inspired with 
new views regarding the honesty and integrity of trade 
and commerce as conducted in, and from, the United 
States, and that the demagogue at home should be taught 
that slander is unprofitable. 

At the business congress in Atlantic City this was one 
of the topics discussed in private gatherings. It was re- 
called that the Germans had made it a national policy 
to blacken American business generally. Their reputed 
official newspapers, the North German Gazette, the 
Frankfort Gazette and the Cologne Gazette, were the 
leaders in this campaign of vilification. 

These publications had their weekly "special corre- 
spondence" from the United States. The correspondence 
invariably fell into two sections. The first part solemnly 
and ponderously narrated the doings at some German 
Sangerbund or Turnverein somewhere in the United 

54 



SLANDERS AGAINST AMERICAN BUSINESS 55 

States, and the second part, just as invariably, dealt with 
"American Business Scandals." An alternative caption 
was "Commercial Corruption in the United States." The 
special correspondence of the three inspired organs was 
copied by the minor newspapers throughout the Empire. 
The Wolff Bureau also disseminated cable despatches 
from the United States magnifying the most trivial com- 
mercial incidents and distorting the utterances of Ameri- 
can politicians so as to create striking "scandal" and 
"corruption" stories. Other countries of Europe were 
also affected by the virus of this systematic campaign. 

In starting on the new phase of American plans for 
industrial and commercial development many American 
business men are of the opinion that effective measures 
should be undertaken for the purpose of undoing the 
evil already done, and of asserting at home and abroad 
the determination of American corporations to vindicate 
the high reputation to which they are justly entitled, and 
to combat all future attempts to reflect on the honor and 
exalted principles and methods of American business as 
a whole. 

One American manufacturer told his hearers at At- 
lantic City that, in connection with the business which 
his company does in countries around the world he 
travels in many lands and, like all those American travel- 
lers who endeavor to penetrate the thoughts of the for- 
eign business man, he has had the painful experience of 
hearing American trade methods alluded to as corrupt 
and dishonest, as if the statement were accepted as 
axiomatic. He cited instances. 

In a railway train in Eastern Europe a Budapest cot- 
ton spinner was disserting on the "low commercial moral- 
ity" of the Americans. The American made the Hun- 



56 AMERICA IN WORLD MARKETS 

garian eat his words, but only after a display of energetic 
determination, in which the muscular physique of the 
American traveller may be credited with having had its 
due spiritual effect. As a guest in the Strangers' Club 
in Buenos Aires, he had the unpleasant experience of 
hearing an agent of a European firm refer contemptu- 
ously to the "lack of ethical principles" among American 
manufacturing concerns. Again the American was up in 
arms, and as he happened to be aware that this particu- 
lar agent was also the representative in the Argentine 
Republic of a well-known American machinery company, 
he forced from the man what amounted to an abject 
apology. 

"The time has come," this speaker declared, "to take 
action in the matter, and it is a case of organising and 
of deciding on the methods best adapted for the purpose 
to be attained. The parties at whose door we should 
in the first instance lay the blame for the state of affairs 
we denounce are Americans themselves. And not all of 
them are mere demagogues or soap-box orators. They 
are in many instances men filling high positions to which 
they have been elevated by the suffrages of the people." 

He emphasised his point by quotations from speeches 
and from interviews and signed articles in newspapers 
and periodicals. He told how he made it a practice of 
following up the slanderous statements and how more 
than once he had succeeded in exacting apologies in this 
connection from men in public life. Certain newspapers 
in this country which systematically supplied the basis for 
the stories of American business corruption circulated 
by the German press agencies have also been tabulated 
by him for continuous surveillance. 

"Now it is a fact," he went on, "that American busi- 



SLANDERS AGAINST AMERICAN BUSINESS 57 

ness generally is conducted on a scale as lofty as has ever 
been reached in any country. Indeed, in dealing with the 
foreigner Americans have frequently been animated by 
the humanitarian principles they have revealed in their at- 
titude and conduct in this war. Yet this abuse tends to 
rob us of what is rightfully our due, to destroy the posi- 
tion on which we should stand and even to place us low 
in the moral ranks. 

"The impression is created abroad that the American 
business man is a being of two natures, a Dr. Jekyll in 
charity and a Mr. Hyde in business. Our public men 
talk as if they were not aware that their words when they 
denounce American business are scattered broadcast, 
that there is a real propaganda picking them out, suppress- 
ing the compliments and the qualifications and publishing 
only the abusive statements, that these are quoted and 
repeated and that they sink in. We should have an asso- 
ciation which would make it its business to refute and de- 
nounce openly any public official making untrue state- 
ments about our industrial and commercial honor and we 
should have a wide line of publicity to do justice to the 
integrity of American commercial methods." 

Rash general statements regarding hostility between 
employers and employed should be an unpardonable of- 
fence in the new conditions, and anything that might 
seem a oasis or pretext for them should be scrupulously 
avoided. Mr. Samuel Gompers, president of the Ameri- 
can Federation of Labor, was quoted in the press in 
January, 1919, as having stated in a signed article : "The 
war brought a better understanding between capital and 
labor than ever existed before. It was the hope of many 
— and surely of all labor — that the co-operative relations 
that grew up when the employer and the employee fought 



58 AMERICA IN WORLD MARKETS 

side by side for America might endure through the years 
of peace. But, from mutterings that already have come 
from capitalists, it would seem that theirs was a friend- 
ship during the war of only a surface nature; a friend- 
ship superficial rather than sincere. 

"And that is regrettable. Labor does not want con- 
flict with capital. Labor yearns for peace and tranquil- 
ity. It asks for a fair deal — and nothing more. It cur- 
ries no favors ; seeks no gifts from capital. But some of 
the industrial monarchs have already placed themselves 
on record as being opposed to giving to labor even the 
square deal it has asked for." 

This, if it were so, could not but be a deplorable con- 
dition of affairs. But, unsupported by an enumeration 
of facts to justify so sweeping an assertion regarding the 
seeming lack of sincerity in the friendship of capitalists 
for the workers and the prospect of their co-operative re- 
lations not being enduring, such statements invariably 
leave the impression that they are of the kind made by 
those who, through a habit of considering only one side 
of a question, have formed a parti pris, or those who, 
having what they regard as a political motive, indulge in 
exaggerations as a political privilege. Attacks on one 
side of the business community, if they are rash and ex- 
aggerated, are an injury and an offence to the whole busi- 
ness community. By their cumulative effect they can be 
distinctly harmful. 

Heretofore, when made against the employers in a 
body, they have been allowed to stand uncontradicted. 
There was no leader or organisation to attend to the con- 
tradicting. Now that American industry has shown its 
ability to get together in congress, the way should be 



SLANDERS AGAINST AMERICAN BUSINESS 59 

easy for making arrangements not to allow statements or 
actions to go unchallenged if their effect is liable to be 
disruptive of the solidarity that must be conserved be- 
tween the constituent elements of American industry. 



CHAPTER IX 

INDUSTRIAL RELATIONS 

Capital — Catch-Words That Stigmatise American Busi- 
ness — Labor the Nursery of Capital — Their Inter- 
ests Undivided. 

Labor — The American Workingman Refuses to Be 
Labelled — Appreciates His Rights as an American — 
Labor Leadership. 

Representation of Labor — Participation in Industrial 
Administration — Error of Judging from Extremes — 
The LaFollette Law— Where Labor May Be 
Brought In — Welfare Work Improperly Conceived. 

Minimum Wage — 111 Success in French Cities — A Brit- 
ish Plan — The "Minimum Plus" — International Pro- 
posals. 

Capital 

The politicians divided industry into two classes and 
built up a reputation for each. Capital was immoral; 
labor moral. Furthermore, they said, there was "antag- 
onism," essential and fundamental; the antagonism of 
the lion and the lamb. Labor was welcome in national, 
State and local administration. It was welcome in poli- 
tics. In fact, politics was primarily in behalf of labor, 
or "the producers." Capital's other name was "private in- 
terests," or "special privilege," or "predatory wealth." 
Words were weapons. 

Capital must be kept out of administration and out of 
politics. For capital corrupts legislation. This was a 
dogma with the politician, one of the dogmas that kept 

60 



INDUSTRIAL RELATIONS 61 

his control secure. Capital's one aim and purpose, if it 
were admitted to a share in public affairs, would be to 
corrupt legislation. Therefore capital must be kept out. 

And business men were bluffed and stayed out, because 
those whom the politicians classed as capital, the pro- 
ducers of the nation's wealth and the makers of the 
nation's greatness, did not like to own up to it that they 
were capital. A stigma had been attached to the word, 
and it was enough to scare them away, to make them 
accept the condition of aloofness from public affairs that 
was allotted to them by the politician. 

The business men who disregarded the ban and entered 
public life usually withdrew in disgust. They could not 
bring themselves to use the weapons of the politician to 
maintain their position. American business, consequent- 
ly, did not have its full share in American public life. 

When the great emergency of the war came, the poli- 
tician was helpless and the business men were called in. 
They saved the day. 

It is inconceivable that American business will permit 
itself to be driven back to the old condition, that it 
will continue to be intimidated by old phrases and dog- 
mas. If business men are capital, then let them accept 
the title. But let them set their faces against the poli- 
tician who in the future may attempt to divide capital 
and labor on the basis of any antagonism. The "capital" 
of the politicians is of course only a figment of the imagi- 
nation ; and so, too, indeed is "labor." 

Capital after all is the aggregation of those who pro- 
duce and more specifically of those who originate, who 
take the chances and who create and furnish opportunities 
for work. Capital is not merely the manufacturer and 
the merchant, the banker and the professional man ; it is 



62 AMERICA IN WORLD MARKETS 

the farmer and the miner, the shopkeeper and the worker 
of every kind who furnishes work and a means of exist- 
ence for others. Between capital and labor there is, of 
course, no wall of obstruction. 

Capital formerly was labor. Capital, consequently, is 
growing and labor is its nursery. The worker who is in 
the ranks of labor to-day may be in the ranks of capital 
to-morrow, and without ceasing to be a worker. Many 
who are capital at the present time will later on be labor, 
with a prospect of again reverting to the role of capital. 
There is a constant passing back and forth between the 
two grades, and the one great stimulus to ambition and 
to the joy of life and of work in a free country like 
America is the fact that the ranks of capital are always 
open and steadily receiving recruits from the ranks of 
labor. 

Whatever benefits labor must benefit capital, and 
whatever injures capital must injure labor, for the 
interests are mutual and they are interdependent. Capital 
can have no conceivable motive in preventing labor from 
organising. Newly organised bodies of workers are 
hardest to deal with, because usually they seem 
imbued with the idea that their organisation or 
union frees them from the obligation of co- 
operation and co-ordination and can bring to them 
a millennium of good things, but time heals that 
trouble and it is an established fact to-day that capital 
realises that it is greatly to the benefit of the common 
interests that labor should be organised. The more labor 
is skilled, the more it is educated, the more lofty its views 
and the greater its self-respect and its patriotic spirit, the 
more surely will it understand and appreciate its status 
in the common life and the better will it fit into its place 



INDUSTRIAL RELATIONS 63 

in industry. And as capital should organise, not at the 
behest of any outsider or according to plans formulated 
for it from without, but only for its own interest and with 
proper account taken of the interests of the whole com- 
munity, so also should labor. 

The only true conception of business is that which con- 
siders it, not as a one-sided affair, but as something irr* 
which both capital and labor constitute an inseparable 
and integral whole. The establishing of correct ideas in 
this regard is the duty of both capital and labor and it is 
to their common interest to take away from the politi- 
cian the catch-phrases and fallacies that have allowed him 
to remain in power by creating an artificial gulf between 
capital and labor. 

Labor 

The American worker — it is an encouraging and com- 
forting fact — refuses to be put into a category connoting 
inferiority and to remain there branded or tagged. The 
German worker decidedly was a worker and accepted a 
grade allotted to him in his class, first, second, or third. 
He was a master tailor, a journeyman tailor or a second- 
rank tailor, and so for the other trades. And such for 
good and all he seemed willing to remain. 

Some sociologists and self-appointed class leaders 
among us wonder why a great chance is being missed, 
why there is no "labor party" in this country, since the 
American workers could, as such, wield so tremendous a 
power. These students of social philosophy are perhaps 
too busy studying to observe the ways and traits of those 
among whom they live. They have not observed the 
American workingman — the worker worthy of this title. 
They are probably not aware that if a " workingman' s 



64 AMERICA IN WORLD MARKETS 

club" were established, or a "workingman's theatre," or 
a "workingman's department store," the American work- 
ingman and his wife would give it a wide berth. 

The Bolshevist fraternity show more discernment when 
they class the American workingman as a bourgeois and 
his wife as a bourgeoise. The American workingman 
and his wife, as far as their circumstances permit, attend 
the best theatres, buy in the best stores and assert their 
right to take an interest in American politics on the same 
footing as the so-called best in the land. Precisely because 
they are Americans they feel that they are as good as the 
best, and that they are on the way always to better con- 
ditions. 

Mr. Charles M. Schwab can harangue the workers in 
an American shipyard and gain their pleased attention, 
addressing them as his "fellow-workers," and enlivening 
his speech by anecdotes of his own career as a worker. 
But the politician or agitator or other superior per- 
son who should try to stir a gathering of real American 
workingmen by addressing them as "workers" and put- 
ting them in a class for the purposes of his appeal would 
receive short shrift from them. The prerogative of being 
Americans, free and progressive and with an indepen- 
dent title to interest and participation in the development, 
politically, socially and industrially, of their country, is 
one that they are not going to surrender at the invitation 
of some newcomer with ulterior motives of his own. 
They have ambition and they have no desire to see it re- 
stricted by annexing themselves to a party that will try 
to hold them permanently by putting on them the brand 
"Labor," in a sense of which they do not approve. 

The American workingman may tell you he is working 
for the Government, for a corporation, for an individual. 



INDUSTRIAL RELATIONS 65 

In reality he feels that he is working for himself. His 
"boss" the other day was working for others. He him- 
self has the prospect of being a "boss," and of providing 
work and remuneration for others. Not that that pre- 
cisely is his ambition, for the "boss" notion is a bit odious; 
but it is a concrete way of conceiving and expressing the 
reward of systematic, persevering work, of initiative and 
enterprise, of the opportunity that being an American 
provides. 

The American workingman is ripe for the inculcation 
of the true doctrine regarding his status, for the over- 
throwing of the interested politician's catch phrases and 
of the treacherous agitator's flattering assertions that 
the workingman is the producer and consequently the 
rightful dominant factor in industry. The American 
workingman knows that he is an essential factor in pro- 
duction, and if assured of proper recognition in the mat- 
ter, assured that the other factors in production recognise 
that he too fills a primary role and has vital rights to con- 
sideration, he will not be led to affirm that his share is the 
paramount one ; he may be counted on to co-operate with 
the other essential factors, to fill his role as a part of busi- 
ness, as an industrialist and a business man. Towards 
this desirable result the old-time politician need not be 
expected to lend any aid. If it is to be brought about, 
it is for those engaged in industry to undertake the 
effort. The cause of labor deserves new treatment. 

The prominent and authoritative representatives of the 
manufacturers in America invariably discuss labor in 
sympathetic terms. They are chary of criticism, obvi- 
ously anxious to avoid wounding any susceptibilities, 
Castigations of labor organisation that are occasionally 
printed in this country usually come from spokesmen of 



66 AMERICA IN WORLD MARKETS 

other lands. Thus a prominent British industrialist, head 
of airplane and other factories, who in February of this 
year was in the United States on business, voiced for 
publication a manufacturer's view of trade unionism as it 
is controlled in Great Britain, making an allusion also 
to the control of organised labor in America. Among 
other things he said : 

"Trade union officials have always been afraid to let 
the workingmen know too much in fear of losing their 
own comfortable jobs. I have repeatedly explained to 
them that by controlling the hours, that is, letting the men 
work fourteen hours if necessary when there is work to 
be done, and slacking down to four when there is not 
much doing, they would avoid the discharge of workmen 
from factories and every one would benefit all around. 

"At the present time, instead of being the most up-to- 
date and efficient organisation trade unionism in Eng- 
land is one of the largest and most antediluvian concerns 
extant. The sooner the workingman knows that his 
leadership is wrong, his premises wrong, his ideals de- 
based, his personal benefit from them minute, and his 
waste of opportunity the greatest in any organisation in 
the world, he will begin to want a change. He wants 
it now in England, but there are no politicians to en- 
lighten him, for they have a party to fear and no leader 
whom they dare listen to openly. 

"Democracy has never been a great judge of a leader. 
Democracy might have chosen a picturesque figure like 
the late Lord Kitchener, but never a genius like Marshal 
Foch. Labor mistakes itself for democracy, but it is only 
the organised part of democracy. Labor by organisation 
controls so much, yet it has failed completely. Every- 
body but labor knows it has failed. To organise a strike 



INDUSTRIAL RELATIONS 67 

is not a success. To have had to strike means failure. 

"Think of the difference in the ideals and character of 
the man who went to the trenches, his ungrudging pres- 
entation of his best effort, his best brains and his life if 
need be, with the same man's slothful folly in the factory 
under trade unionism. 

"When men take twice as long to build even their own 
houses, they increase their rents and in this method of 
stretching hours out they have increased the cost of liv- 
ing before they increased their wages. I estimate that 
workingmen in the United States in not using their brains 
and hands for their own good are losing fully $4,000,000 
an hour, or $8,736,000,000 per annum. Rich men are 
the mainspring of enterprise and advancement and la- 
bor's profit. Rich men are rich, not because they have 
robbed the workingman, but in spite of the workingman 
having robbed himself." 

The fundamental right of labor is to full remuner- 
ation for work accomplished. If it be true that it is the 
policy of labor leaders in England or elsewhere de- 
liberately to protract the time in which a given work can 
be performed, then indeed there is justification for the 
charge that a form of "slavery" is being imposed on the 
workers. To force or to induce the workers in a plant 
to take eight hours to do work they could accomplish in 
four is to mulct them by putting in four unnecessary 
hours without pay and to make them party to paralysing 
fifty per cent of the productive power of the plant, to 
nullifying the opportunity for an equal number to 
obtain employment, to destroying potential wealth by 
impeding production, to preventing the cost of living 
from being reduced and to inflicting indirectly an injury 
on the whole public. The object of industry is produc- 



68 AMERICA IN WORLD MARKETS 

tion. Without work there cannot be production; with- 
out production there can be no wages. If these elemen- 
tary facts were kept constantly in view by the individual 
worker, much of the enormous waste caused by indus- 
trial strife would probably be eliminated. 

It is only human to be impatient of criticism and re- 
proof. The manufacturer will instinctively resent being 
told how to conduct his own business, and a body of 
labor may insist on being allowed to manage its own 
affairs. Whether on the side of manufacturers or of 
labor it is rare that the most is made of the opportunities 
that present themselves. Human weakness, especially in 
the direction of human slothfulness, to use the English 
magnate's word, is there to prevent it. All men object 
to being driven; they do not want "efficiency" tests ap- 
plied to them; they are not machines; they refuse to be 
commodities. Man is not in this world just for industry. 

But criticism may do good, for it may point out evils 
and losses that have been overlooked or have not been 
concretely visualised. The manufacturer, while he may 
not welcome advice, will profit by it, if judicious and 
beneficial. So also may labor be expected to do under 
like conditions. If the British manufacturers' restrictions 
— not so much regarding labor, be it noted, as regarding 
labor leadership — are well founded and indicate a spe- 
cific and hitherto neglected matter for improvement in 
the prime interest of labor itself, they will have justified 
their publication and may lead to desirable changes. 

Representation of Labor 

The desirability of according to the workers participa- 
tion in the councils of industrial administration, and how 



INDUSTRIAL RELATIONS 69 

this is to be provided for and what measure of partici- 
pation should be accorded, will of course be the subject 
of increasing study on the part of those directing the 
industries. 

Here again we are confronted with extremes, and in- 
terested parties on opposite sides are unfortunately prone 
to draw arguments from the extremes. In this case one 
extreme is a total denial to one element in production 
of participation in the policy of production, and at the 
other end is an extreme such as that typified in the 
Kerensky Prikase No. I, which conferred on the Rus- 
sian soldiers the right to use their own better judgment 
about accepting or rejecting the orders of their officers. 

There are some who have seen a precursor of the Bol- 
shevist doctrine in our own Seamen's Act, the La Fol- 
lette Law, which they regard as indicating a tendency to 
constitute the workers on shipboard, not merely the ar- 
biters of their own fate, but also the dominant voice 
with regard to the handling of the ship. This, it would 
seem, must be an extreme opinion, for, however demo- 
cratic the flag under which the ship sails, a ship is one 
place which calls for autocratic government. A ship's 
captain is and seemingly must be an autocrat, whatever 
safeguards against abuse of power we may erect around 
him. If this is so, and the Seamen's Act or any other 
law should prove to be an attempt against the auto- 
cratic government of the ship, it will not be allowed to 
endure. Incidentally to the La Follette Law, it may be 
observed, first, that although enacted as far back as 
191 5, the war caused it to be disregarded, so that hith- 
erto there has been no way of judging how it will work 
out; second, that the point raised to the effect that the 
wages stipulation would make the cost of operation of 



70 AMERICA IN WORLD MARKETS 

ships of American registry prohibitive is not conceded 
by all of the best judges, some of them affirming that 
wages represent only about four per cent of the cost of 
operation of a cargo vessel and will represent a still lower 
percentage with the projected general introduction of oil 
fuel on American ships, and furthermore that wage in- 
crease on American ships would force a corresponding 
increase on the ships of other countries, and finally that 
the obligation that a certain percentage of the crew 
shall be able to understand commands in the English 
language may ultimately be interpreted as permitting the 
employment of coolies who have a knowledge of "pigeon 
English." So that after all the Seamen's Act may not 
be an appropriate case for argument regarding the ad- 
ministrative representation of labor. However that may 
be, it will be desirable not to take any stand on the ques- 
tion based on extremes. 

The right path lies in between. Many industries have 
been following it, the workers receiving consideration as 
an essential element. These industries will be ready to 
revise their methods and to inquire what fuller form 
of representation may be due to the working element 
and others can be induced to follow the example. Both 
executives and workers must come to realise that com- 
mon sense forbids the exaggeration of extreme instances, 
that in the common interest there must be conciliation. 
The millennium has not arrived and human frailty will 
continue to manifest itself no less among the elements 
of industry than wherever men are thrown into inter- 
course with one another. There is always something to 
condone on each side and progress and civilisation de- 
pend on good will and co-operation. 

We may count on it that capital and labor in 



INDUSTRIAL RELATIONS 71 

America will agree. If they do not, then we shall have 
come to the end of a fine era of civilisation in which 
America had taken a noble and conspicuous part. 

Capital and labor, by the way, might be good words 
to abolish. Capital has had a note of opprobrium at- 
tached to it and Labor has been made the object of 
abuse and misuse, so that to-day the words do not fit- 
tingly denote respectively the body of American manu- 
facturers and merchants and the body of American work- 
ers. No offence may be implied in speaking of "im- 
proving labor conditions," "rehousing labor" and so 
on, but the phrases are calculated to be offensive, as they 
carry the idea of charity, of condescending generosity, 
from above downwards. If the workers themselves were 
understood to be taking part in the planning, improving 
and rehousing, so that the changes and reforms were to 
be effected by their initiative as much as by that of any 
others, it would be a different matter. American work- 
ers must be treated as independent, self-respecting, full- 
grown members of the community if the politician's and 
the agitator's game is to be nullified and if conciliation 
and co-operation are to be brought about in American 
industry. 

The democracy of industry is a goal to aim at. Indus- 
try will be democratised when adequate recognition is 
generally accorded to all its various component elements. 
The trouble has been that, in the past, outsiders have 
been legislating to impose on industry their notion of 
its needs in the way of democracy. The change can be 
properly effected only from within. The internal evo- 
lution of industry up to a true democracy would unques- 
tionably prove to be the most potent influence in stabilis- 



72 AMERICA IN WORLD MARKETS 

ing the national regime and in constituting America the 
model for all governments. 

We have heard it affirmed as a motive for discontent 
on the part of workers in our period that the soulless cor- 
poration had come along to hurt the interests of the 
worker ; that in the old days when a single family owned 
the plant the head of the family took a direct personal 
interest in each worker, sympathising with him in his 
woes, having the doctor attend him when he was sick and 
otherwise serving as a generous patron, whereas now, 
with a corporation in control, all this beneficence was 
gone. Now if that is the only change which the corpo- 
ration has brought, it is something to rejoice over. 

The worker in other lands may like to be patronised, 
to be an humble item in a feudal system, but the further 
we get away from that sort of dispensation in America, 
the more we shall feel that our claims to freedom and 
modern advancement are being justified. Some corpora- 
tions had qualms on this subject and engaged in welfare 
work of a kind that simulated the old paternal beneficence 
of the factory owner. How has it worked out? One 
of those who have taken a leading part in this form of 
generous effort recently told me that his people are now 
satisfied that their welfare work was all wrong. They 
are convinced, he said, that it would have been better 
to use the money devoted to welfare work in increasing 
wages. 

Independence and ability to look out for themselves 
are characteristics of the American workingmen and it 
would be a sad day if their fibre began to weaken so that 
they should desire others to look after them, whether 
it was by personal benefactions or by State or national 
paternalism in their behalf. They know enough to real- 



INDUSTRIAL RELATIONS 73 

ise that they themselves would be the losers by it in every 
case and that, as the French say, they would have to pay 
for it eventually in their persons. 

Minimum Wage 

The minimum wage is a question of the immediate 
future. Mr. Lloyd George has pledged the British Gov- 
ernment to it. In Massachusetts and other states we 
have had laws tending to impose it, but the war has in- 
terfered with their practical application. 

The French municipal authorities in Paris and else- 
where prescribed minimum wages to prevent the ex- 
ploitation of the women members of families whose men 
were at the front. It was a case chiefly of trying to 
foil unscrupulous sweatshop masters — usually foreigners 
— in the clothing, dressmaking, feathers, lace and em- 
broidery trades. Sums from five francs down were stip- 
ulated as the remuneration for certain kinds of work on 
the basis of the amount that could be done in a working 
day. The worker, if underpaid or otherwise mistreated, 
could appeal to a special board. 

But the plan did not work. Those who appealed were 
boycotted by the bosses and the women generally were 
intimidated. There was not enough machinery back of 
the municipal law to assure its enforcement. 

In England the plan is being tried of establishing a 
minimum wage with extra pay for good work. The 
minimum or basis is conceived as applying to workers 
who render service which is not above the average. The 
"minimum plus" arrangement implies adequate compen- 
sation for above-average service rendered by the indi- 
vidual. The competent and willing worker is to be paid 



74 AMERICA IN WORLD MARKETS 

for all the service he gives above and beyond that re- 
ceived from those who get the minimum or basic pay. 

The establishing in all countries of the principle of 
the minimum wage, through the appointing of an inter- 
national labor board to secure joint action on the ad- 
justment of conditions of employment, was proposed by 
the British Labor Party. It would certainly go far 
towards solving some of the gravest economic problems 
of the nations and proving a powerful influence for 
world peace, if it could be put into effect. 

Some British manufacturers have expressed their op- 
position to the minimum wage project unless the German 
method of grading labor is adopted, the operatives to be 
divided into first, second and third class workers and 
minimum wages established for each class. Labor lead- 
ers, however, declare themselves unalterably opposed 
to any such practice. 



CHAPTER X 

INFLUENCES AGAINST BOLSHEVISM 

Germany's Foul Crime — A Typical Russian Nihilist 
Group — Wolfish Leader and Following of Defectives 
— Organised for Sabotage in Industry — Waves of 
Crime That Follow War — The True American Worker 
Immune — The Remedy of Publicity. 

A foul crime of Germany's was the organising 
against the nations of the Bolshevist movement. The 
Russian of tousled hair and bushy black beard, with 
bombs protruding from his person, was regarded by 
most of us as merely a comic opera figure. But he ex- 
isted. England and Switzerland gave the Nihilist sanc- 
tuary. Usually he did not directly abuse their hospi- 
tality. He conspired — for that was his business — but 
against other countries. 

It was part of the routine of slumming in the White- 
chapel region of London twenty odd years ago for 
strangers to attend a Nihilist gathering, and in Swiss 
cities also the visitor was generally welcome at the group 
meetings if he brought tobacco or money for the breth- 
ren. The "group" generally consisted of a central direct- 
ing figure, of shrewd appearance, the herder of the flock, 
surrounded by a number of freaks, male and female, 
"idealists' * and brutes, mental, moral and emotional de- 
fectives. 

Sunday afternoons were the popular gathering occa- 



16 AMERICA IN WORLD MARKETS 

sions for the Nihilists in the Houndsditch and old Spital- 
fields sections of London. In a badly-lighted, evil-smell- 
ing garret the unkempt fraternity would hold meeting 
when strangers arrived, seemingly more for the benefit 
of the latter than for any other discernible reason. The. 
keen and usually wolfish-looking person in charge would 
designate a speaker and some poor blear-eyed degener- 
ate would arise and rave and lash himself into a frenzy 
in a foreign tongue, until the slumming party became 
gradually nauseated and disgusted and decided to go, 
glad to donate a piece of silver for the "cause," espe- 
cially as by that means there was better prospect of 
getting out to the fresh air again unmolested. 

Who ever would have dreamed that a great nation 
would one day capitalise the Russian Nihilist, would one 
day organise such criminals and madmen as these for 
the spread of anarchism and for the destruction of that 
nation's adversaries? 

Even before the war Germany had begun to turn them 
to practical account. They were injected into the "Syn- 
dicats" in France and the sabotage committed against 
French Government property, railroads and industrial 
plants by the "Syndicalistes" is now known to have been 
for the most part the work of Nihilists acting under the 
direction and inspiration of German Secret Service 
agents. France has not succeeded in rooting them out. 
They were the criminal element also in the International- 
ist body, with headquarters in Berne, which worked to 
such evil purpose in Belgium before the war, and which 
during the war scattered funds lavishly among the Anar- 
chist-Socialists of Italy, with results which at various 
times made the condition of Government in the Penin- 
sula exceedingly insecure. 



INFLUENCES AGAINST BOLSHEVISM T7 

The grand coup by Germany, however, was the financ- 
ing of Lenine and Trotzky and the despatching of them 
to Russia to subvert law and order and to turn anarchy 
loose. How well the emissaries worked need not here 
be described, nor the retribution which came down on 
Germany through the orgy of crime she herself had so 
wantonly started. 

Wars are usually followed by "waves of crime." The 
atrocious business of killing has a depraving effect, espe- 
cially on the morally weak, with physiological results 
which are fairly well understood. Such natures do not 
revert promptly to the modes of thought and sentiments 
of orderly life. Murderous brutality as it was taught 
to the German soldier could only leave an ulcer not 
easily eradicable. The wave of crime is intensified where 
civic discipline has broken down, where social disorder 
is attended by privations of every kind. Poverty and 
hunger breed the bandit and the outlaw. Germany taught 
the vilest outlaws of our time how to organise and on 
Germany falls the responsibility for whatever waves of 
crime may follow the war she loosed on the world. She 
need therefore be but little surprised if there is a lack of 
outside sympathy for her in the afflictions that beset her 
at home. But if Bolshevism, the doctrine of the cut- 
throat Nihilists and their feeble-minded followers, 
brought to Germany a riddle to solve, it has brought a 
problem also for peoples who had been engaged in peace- 
ful pursuits and who meditated no career of national 
crime. 

How much of a problem is it going to be for America? 
Are our Socialists turning into Reds and our Reds into 
Bolsheviki and, if so, how far is American patience to 
be stretched ? That there could be a wide seeding-ground 



78 AMERICA IN WORLD MARKETS 

for such doctrines in America, so that they could grow 
to be a menace to our free institutions, is something too 
preposterous to deserve discussion or consideration. 

Bolshevism is the foe primarily and essentially of busi- 
ness and of business men. It has been observed that the 
Reds disregard the two extremes in the social scale; that 
they make no quarrel with the very highly placed or with 
the very lowly. Their war is against those in between. 
Capital — meaning those engaged in active, progressive, 
constructive work, in the utilising of human energy in 
industry and trade and in the development of the civil- 
ised well-being of peoples — is the avowed enemy. 
Towards labor the Reds profess friendship. They affirm 
at times that they are part of a movement in which labor 
is an element. In reality however the Reds class skilled 
labor in the same category as capital. It also is the enemy. 
Indeed their bitterest assaults have been made against 
trained workingmen, for they are fully conscious that 
their appeal can conceivably be hearkened to only by the 
untrained, the shiftless and unskilled, the ignorant and 
the incompetent. 

Can any one imagine the skilled American working- 
man, who bathes and shaves, wears clean linen, eats clean 
food, lives in clean surroundings and has a high degree 
of education, accepting instruction on the vital things 
of life from the illiterate foreigner whose living condi- 
tions have been those of the lowest in the slums of the 
poorest cities of the world ? The American workingman 
is ever working upwards. Is he likely to listen to some 
mouthing criminal or maniac who asks him to help tear 
down the social fabric that permits his sons and daugh- 
ters to participate in all the refinements of a cultured ex- 
istence; to receive high-school and university training and 



INFLUENCES AGAINST BOLSHEVISM 79 

to aspire to the most exalted positions in a free commu- 
nity? It is an insult to the American workingman to 
have his name invoked by the Reds. 

There is money in Bolshevism. Lenine and Trotzky 
have had millions at their disposal and hundreds of thou- 
sands of dollars have been traced from European Russia 
across Siberia and the Pacific Ocean to New York and 
other American cities. And, besides, the disciples of 
Lenine in America practice systematically the levying of 
tolls on those who foregather with them. As long as 
this condition lasts there will always be leaders for the 
Reds, men crafty and clever, willing to take a risk where 
the stake seems worth while, men to whom America and 
American institutions mean nothing, if not an opportu- 
nity to make money by attacking them. Whatever the 
fool sheep may be induced to do, the wolves who herd the 
sheep are shrewd enough to keep within the letter of the 
American laws. The laws are not adequate to meet the 
case of such treacherous enemies of the country as these. 
It has been suggested that the remedy is to alter the laws. 
For a long time past there has been a sentiment in judicial 
quarters that a way should be provided of getting after 
the perverted and unassimilable immigrant and the unde- 
sirable citizen. 

The Reds in our midst are in a well-defined class. In- 
variably the directing minds, the wise ones who control 
the stupid, are foreigners — foreigners in heart, whatever 
may be their status of citizenship. Deportation has been 
suggested as a remedy for their case. Of course the ideal 
way to handle the undesirable immigrant is to deport 
him from Ellis Island, before he has ever had a chance 
to put a foot on the Continent. To try to get him out 
once he has come ashore is quite another matter. Some 



80 AMERICA IN WORLD MARKETS 

of the ablest statesmen in America have expressed the 
conviction that our immigration laws, at least as they 
have been applied during the last ten or fifteen years, 
are utterly insufficient for the protection of the country. 
But powerful influences have steadily shown an ability 
to obstruct any serious attempt to bring about reform in 
the immigration laws or in the method of applying them 
and it is no secret that there is a general belief among 
politicians that any legislator who undertook to have 
modifications effected in the immigration laws would be. 
likely soon to cease to be a figure in public life. So these 
remedies of deportation and of change in the national 
laws do not seem likely to be available at a sufficiently 
early date to allow them to be used with effect against 
the Reds. 

There is one excellent remedy, however, which would 
surely and effectively suit the case. It is the simple one 
of publicity. Bolshevism, the conception of ignorance 
and crime, may thrive on mystery and obscurantism, on 
foreign words and hocus-pocus. Shown up in its naked- 
ness it would be grotesque and ridiculous. Tell the 
American people all about the Reds and their "doc- 
trines" and the abomination would perish from our coun- 
try. A dose of publicity would shrivel it up. American 
business men are interested in undertaking such a course 
of publicity. The weaker vessels in our midst are nu- 
merous. It would not merely be good business, it would 
be humanitarian work to impress on the less tutored 
minds the viciousness and the danger of such un-Ameri- 
can doctrines and to direct them with precision as to the 
course they should follow if ever they should find them- 
selves face to face with the enemies of America and its 
institutions. 



INFLUENCES AGAINST BOLSHEVISM 81 

Organised labor would seem to have a special interest 
in promoting on its own account such a campaign of 
publicity. Mr. Samuel Gompers, president of the Amer- 
ican Federation of Labor, recently declared that the 
Bolshevist movement is causing a direct injury to Ameri- 
can organised labor. "Bolshevism/' he said, "is as great 
an attempt to disrupt the trades unions as it is to over- 
turn the Government of the United States." He added 
that the Reds by claiming affinity with American organ- 
ised labor had effectively been creating enemies for the 
labor unions. What better remedy — indeed what other 
remedy — can organised labor find for the protection 
of its interests and of its reputation than frank announce- 
ment to the public of the exact facts regarding its own 
principles and its attitude. In this way it would deal a 
smashing blow to the foul fiend of treason and anar- 
chism. 

In the times through which we are passing it is prob- 
able that there is but one alternative for concord be- 
tween employers and employees, that a cat and dog ex- 
istence could not long continue. The alternative is an- 
archy. Bolshevism is an old thing under a new name. 
It should be brought home to all the people what anarchy 
means. The way to kill it in the seed is to end the condi- 
tions on which it thrives, to end the causes of discord and 
discontent, to promote education and better living condi- 
tions, to show that whoever fosters "antagonism" is the 
common enemy. 



CHAPTER XI 

THE DOCTRINES OF AMERICANISM. 

Scheme of Existence — America's New Relation to World 
Affairs — No Longer in a Charmed World — We Must 
Uphold American Principles — No Standing Still — 
Government Paternalism as an Alternative. 

Control — The Democratic Principle — The Foundations 
—Who Shall Conserve the Republic?— The Politi- 
cian's Claim — That of the Industrialist — The Control 
That Belongs to Labor. 

Responsibility — Power Without Responsibility — Need 
of a New Rule — Where Capital, Labor and the 
Community Have Been Delinquent — The Case of the 
Newspaper. 

Scheme of Existence 

The new relation of America to world affairs makes 
it necessary for us henceforth to think more broadly, 
with our ideas not limited to our own country, to think 
internationally, knowing that we are from now on an 
integral part of the world administration. We are of 
the international Society of Nations — practically at the 
head of it. Like the Spanish influenza, diseases of the 
body politic can also be pandemic. The afflictions of our 
equals in civilisation abroad are not unlikely to become 
our afflictions. We are no longer in a charmed world, 
isolated from the struggles and suffering, from the griefs 
and ulcerations of the old countries separated from us 
by a thousand leagues of water. 

82 



THE DOCTRINES OF AMERICANISM 83 

If we are not going to insist on our own scheme of 
life, on the principles of Americanism, on individual 
freedom and individual responsibility, on free play for 
initiative and no restraint on the possibilities ahead of 
that initiative, if we are not going to keep pushing on- 
ward and upward, we are going to slide back. There is 
no standing still. Either we advance or we drop behind. 
If we are going to allow ourselves to be pestered with 
introspection and worried about moral, economic and 
social woes and maladies, real or imaginary, to the 
point that we may falter and grow weary, then indeed 
we should be ripe and ready to sink into the soft nurs- 
ing lap of Government control, passive to attempts to 
put into actuation public ownership and all the vacuous, 
soul-killing, ambition-withering theories of the idealists to 
whom the idea of work, real, intensive and continuous, 
is repugnant and to whom individual freedom and hu- 
man self-respect mean little or nothing. Then we should 
be ripe for the disaster and degradation that such theo- 
ries would inevitably bring. Americanism would cease 
to mean anything to the nations. 

To business — capital and labor combined — belongs 
the task of crushing these theories under the heel. Theirs, 
primarily, is the duty of reasserting the American con- 
cept of economic existence, the right of independent self- 
assertion in conformity with just and equable laws, the 
untrammelled right to work honestly and to progress, the 
prerogative of having an ambitious aim in life and of 
striving towards its fulfilment. Business must kick itself 
free from the trammels that are being woven around it, 
for business is the one main object of attack of all these 
anti- American movements. If business unitedly deter- 
mines to force the maintenance of the tenets and prin- 



64 AMERICA IN WORLD MARKETS 

ciples by which America became free and mighty, a har- 
bor for the oppressed and a land of comfortable exist- 
ence, there will be no doubt of America being able to 
continue her own superb progress in civilisation and also 
of being able to spread her beneficent helpful influence 
throughout the world. 

Control 

To this end it is essential that there be control, rigid 
and unflinching, and that that control be in the right 
hands. Let us note this "control" and get a fixed 
meaning on it, for it is likely to be much used by the 
theorists of Government and by the subversive agita- 
tors. 

Control in an autocracy, as has often been pointed out, 
is "from above"; in a democracy it is supposed to be 
"from below," from the people, from the basic unit of 
government, from the individual with a vote. A system 
of government can endure only by virtue of its con- 
trol. 

During the war we were frequently told that democ- 
racy was on trial. With the war over, democracy is on 
trial to-day to a greater extent than it ever was. What- 
ever the theory, we know full well that there are democ- 
racies in which control has actually resided, not in the 
man with a vote, but in the politician. Such democra- 
cies are very much on trial. Problems face them which 
put the existence of government, the maintenance of law 
and order, the conservation of human progress and wel- 
fare at stake. 

How does the politician measure up to the responsi- 
bility? Does he stand as a bulwark in defence of the 



THE DOCTRINES OF AMERICANISM 85 

institutions of progress? Is he a standard-bearer, a 
teacher of virile doctrines, an tip-lifter of the body of 
voters whom he represents? Or is the politician an 
opportunist and a trimmer? Is he a weak and yielding 
support for his country's institutions, justifying his 
flaccid, mollusc conduct in presence of his country's 
peril by the plea, "My district does not favor strong 
action; my constituents want the measure which I know 
to be weak, reactionary, even unpatriotic"? 

Where is control to lie in the days ahead, which the 
contagion of disorganisation in foreign countries may 
turn into days of genuine peril? The forces of busi- 
ness, the forces that are vital with energy and with con- 
structive ability, the forces that are alive to the impera- 
tive necessity of preventing any break in the continuity 
of civilised progress, are the forces best qualified for 
control. The leaders in the business world are tested 
and proven leaders, and to them in national emergen- 
cies there belongs a pre-eminent right to a bounteous 
measure of control. Control in other hands has been 
tried and found wanting. It is time for those who are 
equipped for it and whose interest in the safety and prog- 
ress of the republic — the res publica — is so great, to vin- 
dicate their right to conserve the republic. While the 
politician is temporising — trying to smell how the wind 
is going to blow for him, afraid to take quick decisive 
action lest it terminate his career and his means of ex- 
istence, anxious to curry favor with any who may 
help him, even if they be those pursuing policies in- 
imical to the nation's welfare — the props of national 
control may be undergoing a sapping process, so that 
the whole edifice of government may be resting on sup- 
ports that will not stand the strain if a day of crisis 



86 AMERICA IN WORLD MARKETS 

comes when the forces of destruction put forth a com- 
bined and mighty effort to pull it down. In times like 
these the politician is but a feeble reed. The pillars of 
steel and granite are the robust forces on which the na- 
tion's strength has been built up, the doers and the pro- 
ducers, the designers and the workers. To them belongs 
not merely the privilege of saving the nation in the hour 
of peril, but also of upholding it against the day of evil. 
In a more restricted way consideration may be taken 
of control in the nation's industrial life. Insidious doc- 
trines abound on the subject. Labor learns from the 
flattering politician that to it belongs control. To labor 
indubitably belongs control of itself. If others — be they 
labor leaders or politicians — assume to take over the 
rights of labor in this regard and arrogate to them- 
selves the prerogative of infringing on the measure of 
control to which other elements in the nation are justly 
entitled, there arises a condition of danger that demands 
a vigorous assertion of rights on the part of these others. 

Responsibility 

Power without responsibility is a prime source of 
evil, of disorganisation and of useless waste of effort in 
a new country like ours where development has been 
in progress on so prodigious a scale. The time has come 
to inculcate a sense of responsibility, to decide on ways 
of enforcing its obligations. Business and those whom 
business serves must come to realise their mutual respon- 
sibility. 

Roughly speaking we may for this purpose consider 
the two elements of business, capital and labor and "the 
community," the community being all who are not part 



THE DOCTRINES OF AMERICANISM 87 

of a particular industry or commercial enterprise, or 
group of them, momentarily under consideration with 
regard to responsibility. 

The sins of capital and labor jointly through lack of 
concern for the community, in strikes and contentions 
and disregard of the duty of service, have been patent 
and flagrant in industries at various times and places. 

Capital separately — that is of course certain unworthy 
representatives of it — has often abused the public trust. 
And obviously there is no monopoly of delinquency in 
any one industry. It has been discernible even in the 
publishing industry, and more particularly in the news- 
paper branch. There capital, as in other American in- 
dustries, has as a rule guided itself by highly honor- 
able ethical principles, but power without responsibility 
as it exists in the case of the newspaper can constitute, 
as experience has shown, a very serious menace, and 
while the lapses from the rule of honor are all the more 
notable as they are so exceptional, they are all the more 
grievous as they can lead to atrocious wrongs to busi- 
ness and to the whole community. Corruptio optimi 
pessima. 

Labor, or rather "labor leaders," have often shown 
marked contempt for communal obligations. Many 
persons see an absence of the due sense of responsibility 
in the proposal of labor leaders that the community buy 
the railroads and turn them over, nominally to labor, in 
all apparent probability to labor leaders, to be run prac- 
tically at their own discretion. It is proposed that the 
Government advance the money. But the Government, 
as such, has no money. What it raises belongs to and 
must come from the people. 

The community, through its representatives — the leg- 



88 AMERICA IN WORLD MARKETS 

islative, judicial and executive powers, has sinned also, 
grievously and often, against business. The general 
public may be shocked at having responsibility brought 
to its door for the faults and failures of legislators and 
functionaries and for neglect to realise that the latter 
are its representatives and should be held to strict ac- 
countability. 

In last analysis the whole community is interested in 
business, is part of business or is dependent on it, from 
the industrialist, to the professional man, to the func- 
tionary and on down to the demagogue and the politi- 
cian and those who live by their wits. The searching of 
conscience in entering the new phase of affairs will be 
vain and the putting of the nation's house in order will 
not properly begin until measures are taken to set up 
the rule of responsibility and until power without respon- 
sibility ceases to exist. 



CHAPTER XII 

STATESMEN^ JUDGMENTS 

Secretary Lane's Views and Projects — Confidence in the 
American People — The Get-Together Habit — Disposi- 
tion of the Administration to Co-operate in Solving 
Business Problems. 

Commerce Department Plans — Statement by Secretary 
Redfield — Aid for Industry — Bureau of Standards — 
Bureau of Foreign and Domestic Commerce — Conser- 
vation Division. 

Mr. Lloyd George on the Changed Conditions — The Rule 
for Success — Rights of Capital and Labor — Both 
Must Receive Increased Recognition. 
« 

Secretary Lane's Views and Projects 

Thoroughly optimistic regarding the continued pros- 
perity of the United States and regarding the wholesome 
democratic policies of its governing powers is Mr. Frank- 
lin K. Lane, Secretary of the Interior, with whom I have 
discussed the "problems," theories and forecasts that are 
to such an unusual extent agitating men's minds now 
that the war is over, and from whom I have sought an 
expression of authoritative opinion on the prospective 
policy of the Administration with regard to industry 
and commerce in the new era. His views are expressed 
in the following authorised resume. 

Secretary Lane deprecates forecasts regarding social 
or economic upheavals as an offence against the good 
sense and staunch character of the American people, 

89 



90 AMERICA IN WORLD MARKETS 

That people's marvellous capacity for adaptability to new 
conditions, for ability to handle new problems of the 
gravest character, was shown when it was suddenly con- 
fronted, he says, with a colossal war effort for which it 
was practically without preparation. It was the source 
of the veritable miracle which America performed in the 
war. That same capacity may be counted on to work 
more such wonders in the new era. 

Nor does Secretary Lane admit that there is any jus- 
tification for the forecast that this country is drifting 
toward any radical form of Government paternalism. 
Heaven forbid that it should, he declares. The Bolshe- 
viki, and those who have lived where life was miserable 
and without contentment or satisfaction, may sigh for 
Socialism, for a new theory of communal life. America 
wants none of the new theory. It has its own established 
mode of existence, at the root of which is independence 
and individual initiative, and it is not going to barter its 
glorious heirloom for any new theory which would nar- 
row and stifle individual effort. We have seen a hor- 
rid example in State paternalism in Germany, where a 
whole people was cast in a debased mold, fashioned by 
an autocratic government. 

On the other hand, however, it is quite true, Secretary 
Lane agrees, that the war has effected important changes 
in the outlook on life and in the conduct of the Ameri- 
can people. The most notable change, he says, is the 
very desirable one that we have been developing a 
broader communal sense. We are showing a diminu- 
tion of extreme individualism and a striking increase of 
co-operation with one another. Keeping this fact in 
mind, we can feel reassured with regard to our ability 
to solve the problems that are ahead. 



STATESMEN'S JUDGMENTS 91 

Questions touching the speeding-up of our industries 
for peace work; the control and distribution of raw 
materials; the determination of commodity prices; aid 
for the development of new industries ; protection for in- 
dustries that have grown up as a result of the war; the 
development or restriction of industrial combinations; 
the harmonising of the interests of capital and labor — 
all these, and a thousand others, should cease to be a 
source of serious worry if we reflect that the growing 
spirit of co-operation has been preparing the way for 
their solution on common-sense lines and has also ac- 
customed us to look to the Government for guidance 
and direction and for a sympathetic appreciation of our 
difficulties, and to confide in it to furnish such help and 
assistance as will be of benefit, and as can be given with- 
out derogating from the principle of the individual's own 
responsibility. 

It is the Government's view that a due measure of the 
burden must rest on the individual and that all his fac- 
ulties must be challenged to carry it. But we have seen 
that, in the emergency of war, emergency measures have 
been adopted to meet the critical needs. Special machin- 
ery for this purpose was created during the war and 
could be retained or could be created again for peace 
needs. The Government will be no less willing to adopt 
emergency measures to meet the special needs of the new 
period. When the food question became disquieting, 
prompt action was taken to fix the price of wheat, to in- 
dicate the grade of bread to be eaten, to bar the use of 
meat and wheat on certain days, to insure a wiser policy 
in the more general use of more available, more perish- 
able, and less essential foodstuffs, so that our armies and 
those of our associates in the war should not lack the es- 



92 AMERICA IN WORLD MARKETS 

sentials. Steel and copper and other metals were like- 
wise rationed to the less essential industries. And so for 
transportation and commercial supplies and trading fa- 
cilities generally. 

We may rest confident that we shall be able in peace 
times to cope with any emergency that presents itself ; that 
we shall know when to put special measures into force 
and that we shall know when and how to drop them the 
moment the emergency passes. 

Socialism grows and waxes strong, where, back of the 
individual's effort, there is no conscience. But where, as 
in the broad spirit of co-operation and of personal re- 
sponsibility to the community which the war has fos- 
tered among us, when the man in business has come to 
feel and to act as if he were managing a public utility, 
and to deal with the public on that basis, he will assuredly 
not be an object of molestation, and the Government will 
not dream of setting up opposition to him or confronting 
him with enforced competition. 

The American people have a large generous standard 
and their whole scheme of life is free. Hereafter they 
will have less patience with any system or policy which 
tends to dwarf personal initiative. The speed we have 
made in the war, the almost impossible things which 
we have accomplished, have impressed on the minds of 
all Americans the advantages that come from freedom 
of enterprise. 

It is because our system has educated the people to be 
quick in resource, adaptable in the hour of crisis, that 
we have done the things that many thought could not 
be done, the great achievements of this war in which we 
may take a just pride. The whole nation buckled down 
to the work. Men of large affairs were entrusted with 



STATESMEN'S JUDGMENTS 93 

the handling of the big enterprises of the war. The spirit 
of co-operation manifested itself. The United States 
worked as a unit; and so great things were done. Is it 
any wonder that we are well satisfied with our own 
scheme of national policy, in which the individual is 
free and his expansion and emergence is not only made 
possible, but receives every encouragement, while at the 
same time we continue well aware of the great advan- 
tages that accrue from voluntary co-operation? 

With notable prevision Secretary Lane had taken up 
well in advance the question of providing for the demo- 
bilised soldiers, of fulfilling the Nation's duty toward 
those who had served it and of obviating the danger of 
serious disturbance in the labor market. His plans in 
this regard, which, as elsewhere described, include the 
reclamation of waste lands, the creation of community 
centres and the turning over, on easy terms of payment, 
of farms, dwellings and equipment to the soldiers who 
made the farms and built the dwellings, are being worked 
out and promise notable benefit to the whole country 
when money and authority shall have been received from 
Congress for their actuation. 

As for the other problems, he said the present tem- 
per of the American people is that whatever is needed to 
be done will be done. If it is a case, for instance, of 
meeting a problem of unemployment that might arise 
temporarily in the possible confusion of shifting indus- 
try back over to peace conditions, public works and im- 
provements can be undertaken — road-making, street re- 
pairing, construction of public buildings and transporta- 
tion lines, and the like. Public utilities work can be 
started, even in advance of its being needed, in order to 
relieve the passing disturbance of labor conditions. 



94 AMERICA IN WORLD MARKETS 

Were it the case that manufacturers, in any consider- 
able body, needed help in getting back to their peace 
stride, why again special work could be allotted, or other 
ways and means found to meet that case also. 

New industries may need nursing care and protection. 
If so, tariff laws and other expedients can be invoked 
to promote that end. We are certainly not going to be 
guilty of any criminal economic folly such as allowing 
our new dyes and chemicals industries, for instance, 
to be smothered and swamped by a hostile alien. 

And based on similar ideas and principles must be the 
answers to the questions that are being raised regarding 
our mercantile marine and the possibility of the large 
amount of merchant tonnage we may soon have being 
idle for lack of cargoes contracted for in advance, or for 
lack of foreign commerce to keep it busy. The Gov- 
ernment again can take action or can recommend meas- 
ures to be adopted to meet an awkward situation. 

But in this very connection it may be pointed out that 
forecasts, and more or less gloomy prognostications re- 
garding problems to come, are not always based on ac- 
curate premises. Thus there is already reason to be- 
lieve that there will be a demand on the part of ship- 
ping companies, as purchasers, for all or part of the 
merchant shipping which the Government has construct- 
ed or is now constructing, so that in reality there is no 
positive prospect of the Government finding itself with 
anything like a white elephant on its hands in the way 
of cargo tonnage for which it has no immediate use. 

Who shall claim also the right of prophecy regarding 
wage and salary movements and the rise or fall in the 
cost of the necessities of life? There are assertions to 
the effect that the workingman's wages will have to be 



STATESMEN'S JUDGMENTS 95 

smaller and Government action will be demanded to 
force down the cost of living expenses. How can any 
one speak positively in a matter of this kind ? 

It is intimated also that habits of thrift and of self- 
denial have been inculcated during the war and that they 
will continue, to the detriment of the luxury or non- 
essential industries. If this is so, it certainly cannot be 
proved by the fact that last year more jewelry was bought 
in the United States than ever before in one year. The 
fact is that even with the high wages there has been no 
evidence of any exceptional saving. It is highly prob- 
able that their purchases of Liberty Bonds and of War 
Savings Stamps represent practically all the saving that 
the workers have effected in the unusual period. 

The old law of supply and demand with regard to 
capital and labor may be counted on to hold good. La- 
bor will adjust itself to such new conditions as may 
arise, just as capital will adjust itself. The one impor- 
tant tendency of our internal development worth keeping 
in mind is the fact that we are working more and more 
in co-operation; we are gaining the habit of acting as a 
unit, capital and labor are being more and more fused 
into one whole. In greater union within the fold of in- 
dustry Secretary Lane sees the chief safeguard against 
the forces of disruption. 

As the Sixty-fifth Congress failed to act on the re- 
construction legislation which he advocated, Mr. Lane 
announced that he would press for action on it in the 
next Congress. He said: 

"Congress adjourned without passing any of these im- 
portant national bills which I have been urging: 

"i. The appropriation of $100,000,000 for providing 
farms for returned soldiers upon our unused lands. This 



96 AMERICA IN WORLD MARKETS 

measure was reported in both houses, but never came to 
a vote. I will press it at the next session of Congress. 
Twenty thousand soldiers and sailors have written to 
me supporting it. 

"2. The Smith-Bankhead Americanisation bill pro- 
viding a method by which we can overcome illiteracy in 
the United States and give our 8,000,000 illiterates an 
opportunity to read the newspapers and the Constitution 
of the United States, so that they may not be dependent 
upon what they are told by those who may be hostile to 
the welfare of the country. This bill will be brought up 
for passage when Congress next meets. 

"3. A measure providing for the survey of the power 
resources of the East as well as the West, that our rail- 
roads, industries, and cities may conserve fuel. 

"4. The General Leasing bill under which withdrawn 
coal, oil, phosphate, and sodium lands would be opened 
for development under a leasing system, which has been 
before Congress for five years, and for which there is a 
strong majority in both houses, as shown by the fact 
that a similar bill has passed each house three times. 

"5. The Water Power bill, which will permit the use 
of water now running to waste in our rivers and induce 
immediate investment in over twenty States in the con- 
struction of hydro-electric plants." 



Commerce Department Plans 

A statement in brief of the way in which the Depart- 
ment of Commerce is planning to work for, and in co- 
operation with, American industry in the new era, was 
communicated to me in the following letter by Secretary 
Redfield: 



STATESMEN'S JUDGMENTS 97 

DEPARTMENT OF COMMERCE 
Office of the Secretary 
My dear Sir: 

It is the earnest wish of the Department of Commerce to help 
our industries in every practicable way. It was created for that 
purpose. Hitherto it has been able in the foreign field and in 
that of scientific research to be of much service to American 
business. The time seems ripe to enlarge that service in the 
domestic field by maintaining the touch with industry that the 
War Industries Board has had, and through that developing 
helpful relations between the Government and industry, to their 
mutual good. 

We shall continue the work of the Conservation Division, 
that of industrial standardisation of the War Industries Board, 
as well as the reclamation work and the work of the special 
committee on cotton baling and transportation, allied with the 
storage committee of that board. The fifteen gentlemen who 
have been the heads of divisions of that board have been asked 
to serve as unofficial advisers in this department in connection 
with the same industries. We hope, in this way, to maintain 
the touch of the industries with the Government on a friendly 
co-operative basis and to help them do away with industrial 
wastes, with objectionable trade practices, with unnecessary 
and costly, needless styles and varieties of goods, and, through 
the Bureau of Standards, to co-operate in the working out of 
scientific problems. This in addition to the propaganda abroad 
for which work we are asking largely increased appropriations 
from Congress. 

The records of the War Industries Board relating to industry 
in general and the above matters will in due time be taken 
over by us, as will those of the War Trade Board when the 
latter body shall cease its functions. 

There are three distinct phases in which the Department of 
Commerce will take an active part in connection with the gen- 
eral commerce of the country henceforth. They are: 

(i) The scientific phase, through the Bureau of Standards. 
We shall welcome the opportunity to put the large research 
and experimental facilities of the Bureau of Standards at the 
disposal of industry, inviting the manufacturers to send their 
technical men to us and we, in turn, going to them that in as 
close association as possible with industries on the scientific 
side we may bring to our factories authoritative knowledge. 



98 AMERICA IN WORLD MARKETS 

(2) Through the Bureau of Foreign and Domestic Com- 
merce — promotive work abroad by means of our own foreign, 
resident and travelling staff, coupled with the obtaining of 
information abroad, including the vast mass of information 
already filed and available and the making of special studies 
and inquiries where that is necessary. This would include in- 
formation respecting foreign tariffs, trade-marks, patents, prac- 
tices, etc., etc. 

(3) Through the new arrangements just concluded for tak- 
ing over the work of the Conservation Division of the War 
Industries Board : The work of commercial standardisation, the 
saving of industrial wastes, the removing of hurtful business 
practices, including the co-operative study with a committee 
of the industries through their representative advisers of 
methods to improve the effectiveness of the industries as a 
whole. 

William C. Redfield, 
Secretary. 

The Industrial Board, organised in March, 19 19, 
within the Department of Commerce, to study and advise 
on measures for facilitating the adjustment of business 
to new conditions, announced as one of its principal aims 
the bill to authorise purchase by the Government of 
business might be avoided and "the law of supply and 
demand helped over the gap between holdover war prices 
and a stable level. " 

In setting forth its purposes the Industrial Board 
further stated: 

"Basic commodities such as steel, building materials, 
textiles and food will be considered first and brought to 
a staple basis. The governmental policy, as expressed by 
the bill to authorise purchase by the Government of 
wheat at the guaranteed price and resale of it at the world 
price, is to assist in bringing prices of basic commodities 
to normality by bringing down the cost of living. It is 
hoped that these steps alone will automatically operate to 



STATESMEN'S JUDGMENTS 99 

reduce the price of fabricated articles. If they do not do 
so in any particular case, the industry affected will be in- 
vited into conference. 

"As soon as a stable and wholesome scale of prices 
is achieved the cost of living will have so far been re- 
duced as to create automatically reductions in the price 
of labor without interfering with American standards 
and ideals for the treatment and living conditions of 
labor, and thus the last inflating element will have been 
withdrawn from prices. It is believed that industry will 
agree that the cost of living must be substantially re- 
duced before labor should be expected to accept lower 
wages, and thus industry should stand the first shock of 
readjustment. 

"The assurance to the country of a market stabilised at 
the lowest reasonably expected level will loose such a 
flood of buying for the re-creation of stocks, the making 
up of arrears in the building programme, the feeding of 
needs long starved by economy and the inversion of world 
markets as may stand unprecedented in this country. 
From the stable level thus reached by co-operation we 
may expect a healthy and normal condition created by 
the complete and unhampered operation of the law of 
supply and demand." 

Mr. Lloyd George on the Changed Conditions 

Abroad there is a keen realisation of an entirely new 
condition, of the change coming over the whole face of 
existence, of the fact that business — capital and labor — 
is henceforth to be the factor meriting supreme consid- 
eration, that industrial relations, the relations of manu- 
facturers, merchants and workers, will be the pivot of 



100 AMERICA IN WORLD MARKETS 

the nation's success or failure. Mr. Bonar Law said, 
after hostilities had ceased, "The prosperity of the Brit- 
ish Empire now depends on capital and labor working 
together." 

Mr. Lloyd George, the British Premier, has called for 
national unity during reconstruction and has issued 
warning that in dealing with economic, social and finan- 
cial problems, there must be a new spirit of co-opera- 
tion. "We must face all these questions," he declared, 
"with new eyes and without regard to pre-war views." In 
an election address he said : 

"There is one condition for the success of all efforts 
to increase the output of this country — confidence. . . . 
You must give confidence to all classes, confidence to 
those who have brains, to those who have capital, and to 
those with hearts and hands to work. I say to labor: 
You shall have justice; you shall have fair treatment, 
a fair share of the amenities of life, and your children 
shall have equal opportunities with the children of the 
rich. To capital I say: You shall not be plundered or 
penalised ; do your duty by those who work for you, and 
the future is free for all the enterprise or audacity you 
can give us. But there must be an equal justice. La- 
bor must have happiness in its heart. We shall put up 
with no sweating. Labor is to have its just reward. 
And when the whole world sees that wealth lies in pro- 
duction, that production can be enormously increased, 
with higher wages and shorter hours, and when the 
classes feel confidence in each other, and trust each other, 
there will be abundance to requite the toil and gladden 
the hearts of all. We can change the whole face of ex- 
istence." 



PART II 
THE SCIENTIFIC METHOD IN COMMERCE 

CHAPTER I 

FOR A NEW MORAL CODE 

Men's Sensibilities Dulled by Revelations — German "Sci- 
ence" of Commercial Expansion — Others Have Stud-* 
ied in Same School — Prospect of Germany "Coming 
Back" — Her Real Purpose in Bringing America Into 
the War — German Business Men to Lead Govern- 
ment — Frightfulness in Commerce — No Sign of 
Change of Heart. 

The heart of mankind became calloused under the 
constantly recurring shock of the news of war atrocities 
and of calamities to human beings that stunned and dead- 
ened sensibility. There is no doubt that there has been 
a dulling also of the fine moral fibre that elevated busi- 
ness principles throughout the world, as a result of the 
revelations of unscrupulousness, treachery and unfairness 
in the business dealings of one nation with others. A 
genuine problem of reconstruction that faces the United 
States is the revitalising of that fine moral fibre through- 
out the world. 

As in warfare upright belligerents see themselves 
forced to make reprisals, to imitate degrading methods 
in order to defend themselves against the barbarian who 

IOI 



102 AMERICA IN WORLD MARKETS 

is limited by no sense of principle, so in the business 
world there is always the danger that the man of prin- 
ciple may be forced in self -protection to retaliate with 
some of the measures of the unprincipled, with the re- 
sult that the whole scheme of business suffers a degra- 
dation. If we are to reinstate throughout the world 
American ideals of honor, fair play and generous deal- 
ing in business, we must first dissect in detail the new 
body of business methods which the unscrupulous have 
gradually been imposing on the world. 

Germany, in following her studied plan for the con- 
quest of the world, developed the "science" of commer- 
cial domination. Were it not for the ignoble methods 
often employed, we might say she had made of commerce 
a fine art. She had assumed mastery in it. Her kultur, 
progressive efficiency, was represented notably in com- 
merce. 

Psychology and the study of human traits in the va- 
rious lands of the earth were no less a feature of her 
scientific study than were geography and all the con- 
crete details regarding markets and merchants and mer- 
chandising. It would be vain to deride or minimise the 
importance of the German work and methods in this re- 
gard. They have made their impress on other peoples. 
Other countries of Europe have studied the science of 
business in the temples of Germany. Germany might 
cease to exist as a state and as a power, and yet the 
German scientific methods of business would march on. 
They will march on and they will be intensified, and 
there is no question but that the commerce of the world 
will thereby be lowered in moral tone, unless action is 
taken by the free peoples with upright ideals to bring 
into disrepute that "science" of commercial trading which 



FOR A NEW MORAL CODE 103 

implies disregard for the rights and feelings of others 
and repudiation of the most honorable traditions gov- 
erning intercourse between men. 

To know the evil in its intimate facts, it is important 
to reveal the methods resorted to by Germany to build 
up in brief time her huge fabric of commerce and of 
power in foreign countries. There need be no disposi- 
tion to add to the burden of woe and of universal odium 
which Germany has brought upon herself. But on the 
other hand any false sentiment in that regard would be 
entirely misplaced if it prevented the publication of facts 
of which the business men in a country like ours should 
be informed so that they may know the dangers they 
face and so that they may study measures to overcome 
them. To Germany herself, and to nations that have 
shown an inclination to follow the German lead in this 
regard, there will have been rendered a distinct service 
by the propagating of this knowledge throughout the 
world, if the result will be to force them back to the 
paths of honor and integrity which the leading nations 
of the world have followed in their business relations. 
Not indeed that this would be a very good and sufficient 
reason for making such publication, as there is no in- 
dication of a contrite or penitential spirit on the part of 
Germany with regard to her business crimes any more 
than with regard to her murderous atrocities in warfare. 

Germany, as a matter of fact, is far from being over- 
whelmed and crushed to earth, either in a military or 
commercial way. There is no doubt that she will "come 
back." She is probably in better shape economically than 
most of her European adversaries. She still has a huge 
stake in foreign countries and in world markets. She had 
foreseen and prepared for the possibility of defeat in the 



104 AMERICA IN WORLD MARKETS 

field. The world has been surprised that in true military 
pride she showed herself entirely lacking. She seemed 
willing to be not merely beaten but disgraced. The French, 
after the loss of many a conflict in their long history 
of warfare were always able to say "All is lost except 
honor/' — "Tout est perdu, fors l'honneur." In the 
German case it can be said that "All was lost, even hon- 
or" — "Tout fut perdu, meme l'honneur." 

The Germans, of course, do not look at it in that light. 
When the possibility of losing the war had been laid be- 
fore them, they were always assured that there was an- 
other war in which they would not lose — the business 
war, der Wirtschafts-Krieg. They were not going to 
fight out any forlorn hope on the battle-field merely to 
uphold their military honor before the nations, if the 
consequence was to be injurious to their hopes of com- 
mercial supremacy. They stopped the war with their 
armies still intact, with their soil untouched, with their 
industrial establishments erect, with fires burning and 
wheels revolving. In the course of their war they had 
made it their business to inflict the utmost possible de- 
struction on the economic property of their competitors 
in business, whether belligerents or neutrals. Their sub- 
marine campaign against merchant shipping unquestion- 
ably was motived in an important way by economic con- 
sideration. Honor or no honor, they must have the 
economic advantage; they must keep their own recon- 
struction problems to a minimum; they must be fresh 
and ready to start in the new race. 

The bringing of the United States into the war, which 
seemed such an egregious blunder, was not a blunder 
from the German point of view, since it imposed an 
enormous economic waste on this country which other- 



FOR A NEW MORAL CODE 105 

wise was growing tremendously powerful in a commer- 
cial way, far too powerful not to alarm the Germans who 
kept the commercial future ever before their mind. 

There need, therefore, be no apology for delving into 
the systematic iniquities of German commercial methods, 
since Germany has not been removed as a commercial 
menace to the world and since, even if she had been, 
the methods which Germany originated are quite likely 
to be followed by others, unless this country and those 
like it which champion free, clean, live-and-let-live prin- 
ciples in commerce, succeed in restoring to the world the 
ideals that made of industry and commerce a noble and 
honorable avocation. 

Every American engaged in industry and commerce 
would rejoice if business were really freed from its worst 
incubus, if it were an established fact that the old Amer- 
ican principles of freedom and honesty and above-board 
methods in competitive trade were re-instated through- 
out the world. But unfortunately there is nothing to 
prove it, apart from the conjectures of some well-inten- 
tioned but obviously ill-informed persons. On the con- 
trary, there is every reason to believe that nothing of the 
kind has occurred. 

Towards the end of 191 7 German business men began 
to agitate more or less openly the prospect of Germany 
losing the war and the measures which in that case should 
be adopted so that defeat might be converted into vic- 
tory. Then began the conventions of leading merchants 
and manufacturers, which were held in Hamburg. 

Hamburg, we heard at that time, was revolting against 
Berlin. Vigorous speeches of the late Albert Ballin and 
other business magnates were quoted as indicating that 
the men who in industry and commerce had been the 



106 AMERICA IN WORLD MARKETS 

makers of the great and prosperous modern Germany- 
were breaking loose from the Junkers and the Military 
Party who were dominating the Empire. The close ob- 
server, however, had reason to be sceptical regarding the 
pretended arraying of Hamburg against Berlin. He 
learned, for instance, that Government officials were lend- 
ing the prestige of their presence to some of these Ham- 
burg conventions. At one of them, in November, 191 7, 
Herr Huldermann, a director of the Hamburg-American 
Steamship Company, delivered an address in which he 
more or less openly contemplated the failure of the Ger- 
man armies in the field and forecast the future in that 
event. Scores of Reichstag deputies and representatives 
of several of the Imperial Government departments were 
present on the occasion, having been conveyed to Ham- 
burg in special trains. Although the Hamburg men were 
supposed to be "in revolt," there was a distinctly official 
air about the meeting. 

Herr Huldermann said that, in the worst eventuality 
for Germany, it would be part of the stipulations in the 
peace conference that that country's enemies, the Allies 
and the United States, would agree to pool their raw 
materials and to allot a share to Germany, and would 
also pool their shipping, with Germany again receiving 
her allotment. It would be necessary, he said, for the 
business men of Germany to be allowed a prime share 
in the administration of the State. The diplomatic 
service and the foreign representation generally should 
be the prerogative solely of those versed in economic 
matters. The men who had made Germany rich by their 
dealings with foreign countries should be entrusted with 
the task of re-establishing friendly feelings for Germany 
on the part of those who had been her enemies. 



FOR A NEW MORAL CODE 107 

He described the plans for quickly renewing German 
commerce with the neutral nations and pointed out the 
prospects for the expansion of German commerce in cen- 
tral and eastern Europe, through the development of 
waterways, closer union with Austria and other means. 
His speech was distributed broadcast to the business men 
of Germany and was heralded in business organs as an 
encouraging and satisfying announcement. It will be 
worth watching, by the way, to see how good a prophet 
Herr Huldermann was. At any rate, here was issued an 
intimation that if Germany lost the war the Military 
Party would hand over the reins to the business leaders 
— Berlin would yield to Hamburg. 

With the signing of the armistice the military oli- 
garchy surrendered control of the government. The busi- 
ness men did not — or at least did not openly — assume 
control. There occurred what appeared to be an inter- 
regnum — the customary phenomenon in the change-over 
from one order to another. In this case it looked like 
good business. There are times when a simulation of 
disorder is first-class strategy. General Joffre, in the last 
week of August and in the first days of September, 19 14, 
deliberately gave the appearance of disorderly rout to 
the retirement of his forces to the positions on the Ourcq 
and the Marne, where he had decided that the great bat- 
tle should be fought. Von Kluck with the German First 
Army blundered headlong into the trap that had been laid 
for him. 

Great homogeneous nations of modern times show the 
power of quick recuperation from disastrous wars. 
France after 1871 "came back" with a strength and ra- 
pidity that surprised the world, although in the period 
immediately after her disaster she had to contend with 



108 AMERICA IN WORLD MARKETS 

the Communist troubles, which seemed grave indeed at 
the time. 

To speak of disaster in Germany's case is probably a 
misuse of words. The end of the war saw Germany in 
relatively good physical condition, in comparison with 
the other nations of Europe. The "Imperial democratic 
government/ ' as Premier Clemenceau characterises it, 
was put in the hands of "Socialists" probably long pre- 
ordained for the task. Ebert and Scheidemann were as 
much a part of the imperial war organisation as the Kai- 
ser himself. They or others like them could be expected 
to stay in power as long as sympathy was a desideratum 
and until Germany, in apparent abasement and abandon- 
ment, obtained a "good peace." Afterwards we might 
perhaps look for the fulfilment of Herr Huldermann's 
forecast of the taking over of the administration by Ger- 
many's business men. 

But no radical change in German commercial methods 
need be looked for. Herr Huldermann, in that comfort- 
ing address to German business men dealing with the 
eventuality of loss of the war in the field, spoke of the 
other war, the economic war, which must go on and 
which Germany must win. The commercial war is still 
on. It had never ceased. And it allows no place for the 
ethics of commerce as understood in America. The sci- 
entific methods of "economic penetration" as taught in 
the Handelsakademien, the Polytechnika, the business 
academies and colleges of Germany, and as practiced by 
the diplomatic, the financial and the commercial organi- 
sations of that country, are founded on unscrupulous dis- 
regard for common honesty and for the rights of others. 
Schrecklichkeit — frightfulness — which was at the basis 



FOR A NEW MORAL CODE 109 

of German methods in the field, is discernible also in the 
German policy of commercial warfare. 

German propaganda with a view to trade advantage 
continued during the war and still continues. Its chief 
virulence to-day is directed against the United States. 
From all over Europe we have reports of the energetic 
campaign being waged in the interest of German com- 
merce by special agents and by the diffusion of printed 
matter. American correspondents have cabled accounts 
of the "tireless German propaganda" which is being car- 
ried on for the purpose of disrupting the good relations 
between the Allies and the United States. 

The Department of Commerce has published some 
items regarding German commercial practices in Den- 
mark, which indicate that there is no change in the meth- 
ods which have come to be known as characteristically 
German. The State Department has let it be known 
that, according to its advices from The Hague, Pro- 
fessor Brinckmann was in Holland in charge of Ger- 
man propaganda for foreign countries, and that he was 
actively engaged in a particularly vicious campaign 
against the United States. The advices intimated that 
Herr Brinckmann had agents in the United States who 
were keeping under cover, but who were giving occa- 
sional evidences of their activities. 

Herr Brinckmann is one of Germany's well-known 
teachers of the "scientific" way of developing commerce 
to the detriment of other nations. If the "Socialist" 
government kept him in office months after the signing 
of the armistice and authorised him to continue his work, 
it is an object lesson which American business cannot 
afford to overlook regarding the continuity of German 
commercial policy. 



110 AMERICA IN WORLD MARKETS 

And let there be no easy assumption that Germany's 
commercial influence abroad has been destroyed as a re- 
sult of the war. One significant incident in this connec- 
tion can now be made known without prejudice to the 
interests of Germany's adversaries. When Great Britain 
started the blacklisting of German firms abroad, a num- 
ber of German banks and business firms on the west coast 
of South America came under the ban. These German 
concerns determined to retaliate by doing a little black- 
listing of their own. So powerful were they that Brit- 
ish, French and American houses were thereby stopped 
from doing business. It was regarded as the part of 
wisdom for the British Government quietly to suspend 
that part of its blacklist against the Germans and busi- 
ness was resumed. 

Thus far at least the leopard has not changed his spots 
and it would be imprudent for American business men 
to disregard warnings of conditions that continue to be 
a menace to the free development of American commerce. 

With the coming of peace the German business men 
are getting together again in their beer halls. With their 
methodical gregarious habit they meet at certain hours 
on certain days around the old Stammtisch, "the tribal 
table," around which the fathers and even the grand- 
fathers of some of them may have met in the past. Tables 
of various sizes, each with its group, are distributed 
throughout the hall. And the individual group with 
characteristic air of solemnity, and amid ceremonious 
"prosits," gets down promptly to serious talk of construc- 
tive character. 

"We fought the good fight," we can hear them say. 
"We took hard knocks. Our heads are bloody; but un- 
bowed. We gave as good as we got. For four years 



FOR A NEW MORAL CODE 111 

we stood off the rest of the world — all of it that counts. 
We have been set back a good deal. But we set our 
enemies back still more. We came home with banners 
flying and bands playing, back to our soil which had 
been unscathed. We dealt blows that our enemies can- 
not recover from for many years, and in the meantime 
we shall get off with a good start to carry out our plans, 
to beat down the obstacles that stand in our way. The 
first round is over. The second begins. We shall work 
as we never worked before. We cannot be beaten. We 
are of the stuff that makes world conquerors." 

Germany's business men defended and approved, and 
thus accepted their share of responsibility for German 
crimes in war. They have accepted like responsibility 
for Germany's treacherous commercial policy. But it 
would be vain to make note of the fact or to waste time 
in denunciations, if we are not going to act, to use the 
knife to hack out the German cancer so that it will not 
grow again. The German methods have been in our 
midst befouling America's trade reputation. They must 
be ruthlessly destroyed, no matter who is injured in the 
destroying. Let us know the German "scientific" meth- 
ods of trade, so that we may recognise the danger and 
so that in international trade relations we may replace 
the German spirit of greed and foul dealing by American 
honor and character, straight-line methods, helpfulness 
and good will. 



CHAPTER II 

PROTECTION OF AMERICAN TRADE 

Government Apathetic in the Past — American Interests 
Attacked with Impunity — Business Men Must Unite 
for Their Protection — Task Involves Work Admin- 
istration Cannot Undertake — What American Trade 
Faces in the Future — How Germany Stands Indus- 
trially. 

The Government undoubtedly can do much — it is ac- 
tually doing much — in the interest of the foreign trade 
and industry of the United States. But the tasks that 
are ahead for the protection of the industries and com- 
merce of this country, and on which not a moment 
should be lost, are so variegated that some of them are 
of a kind that the Government organisations, as at pres- 
ent constituted, are not in the best position to under- 
take. 

All that pertains to commerce protection supposedly 
falls within the competence of the national Government. 
Governments generally in the years immediately preced- 
ing the war were taking a quite paternal, if not patron- 
ising, view of their relations to trade and were "doing 
something" for home business. 

All at once there was quite a burst of activity. The 
Imperial Russian Government sent out a swarm of com- 
mercial agents, independent of the consular service and 
of higher rank than the consuls. These agents estab- 

112 






PROTECTION OF AMERICAN TRADE 113 

lished headquarters in the principal commercial cities of 
Europe, advertised in the local press, delivered lectures 
and held "conferences" under the auspices of the local 
authorities and loudly notified the world that Russia had 
desirable wares to export and was anxious for all kinds 
of trade information. Italy sent out a number of royal 
commissioners to cover various lines of trade and the 
prestige of their rank assured them a dignified reception 
wherever they went. England appointed commercial 
experts abroad — some of them Germans. Knighthood 
titles were conferred on them, and Sir Knight and his 
Lady were conspicuous at German civic functions. 
American trade agents filled a somewhat different role, 
being sent out for specific work of a restricted and prac- 
tical kind. 

Germany, it may be noted, did not enter into the gen- 
eral rivalry in the use of the much heralded commis- 
sioners or agents. If she had parties out watching other 
peoples' business, she did not advertise the fact. 

It was felt in Europe generally that the treatment of 
American trade abroad on the part of its own Govern- 
ment was rather shabby. This was ascribed to the politi- 
cal war on the great American corporations. When 
Germany, a few years ago, undertook to confiscate the 
property of the Standard Oil Company by the creation 
of an Imperial Petroleum Sales Monopoly (Petroleum- 
Verkaufs-Monopol) who was there to dare vindicate the 
rights of an American corporation? Every attack — and 
it happened that there were many in that particular pe- 
riod — made in the United States on the Standard Oil 
Company and other large American businesses, was 
cabled to Germany and printed conspicuously by the 
press. The German press gladly disseminated the news 



114 AMERICA IN WORLD MARKETS 

that the Standard Oil Company was the old "he trust," 
in the elegant characterisation of an American Senator. 
All who ran might read in Germany of the utter iniquity 
of American business, and Germans felt that there was 
practically no limit to what they might do against Amer- 
ican corporations. 

And these corporations pathetically continued to lean 
on the slender reed of their own Government's protec- 
tion. They did not dare to do the one thing palpably 
indicated by their own best interests, namely, to combine 
for their protection in foreign markets. The odium 
which had been spread around them was not confined to 
Germany. German agents took care to circulate it in all 
the countries in Europe in which Americans were their 
competitors. There is a residuum of it left, despite all 
the benefactions America has conferred on European 
countries in the last few years. 

What they failed to do in the past, American corpora- 
tions will have to do now. They will have to organise 
for protection. The sooner they begin to make their 
preparations the better it will be for them. They can 
look after their interests in a way which the Government 
could not be expected to do for them. The Government 
will be busy with other problems. In any case the Gov- 
ernment could not very well undertake a specialised form 
of trade protection, and yet it is against particular coun- 
tries, against Germany and those that follow German 
methods, that American trade needs protection. 

Besides, even if there were no other difficulties, Gov- 
ernment agents would not be the desirable instruments 
for the protection of American business against organ- 
ised and insidious attack. American merchants and man- 
ufacturers must select their own agents. The Govern- 



PROTECTION OF AMERICAN TRADE 115 

ment, of course, can rightly be called upon to insist on 
the removal of some of the outrageous disabilities placed 
on American trade in Germany, such as the practical obli- 
gation, if an American firm is going to do business in any 
large way, of organising a subsidiary German company 
and thereby laying itself open to a minute and continu- 
ous inquiry into its affiliations in all parts of the globe, 
its business, its processes and methods. If the details 
that are thus extorted do not furnish the German depart- 
ment of economics with every last fact it is looking for, 
they provide material for the German trade spies in other 
countries to supplement the information. 

It cannot be expected that the American Government 
will undertake the work of ferreting out the snares and 
ambushes that are laid for American trade throughout 
the world by the German system. This would inevitably 
develop into a form of official trade warfare in which the 
United States, with its above-board methods, would be 
but ill equipped to compete. The work falls on the shoul- 
ders of the American traders themselves. And they 
should not allow themselves to be distracted from the 
urgency of undertaking this work by anodyne reports 
regarding Germany's physical condition. What Ger- 
many did to American trade in the past was only a trifle 
compared to what she is already prepared to do in the 
future, if steps are not taken to remove from world com- 
merce the dishonoring processes that are threatening. 

Reports that Germany is exhausted, that her work- 
ingmen are anaemic from starvation, that her railroads 
and manufacturing plants are hopelessly run down, and 
that she will be far behind when the commercial race 
begins, may well be suspected of being a rather coarse 
form of German propaganda. War, instead of totally 



116 AMERICA IN WORLD MARKETS 

exhausting Germany's industrial and trading potential- 
ities, actually organised Germany anew for commerce. 
The vast majority of the plants that were working to 
capacity on war-time production can be turned over to 
commercial production; the plans for the shift-over were 
long previously made, just as the arrangements for the 
shifting of the aniline dye and heavy chemical factories 
to the manufacture of explosives had been made and 
were instantly put into effect when the war began. Com- 
merce will be conducted under a concentrated organisa- 
tion similar to that which proved so effective in the 
conduct of warfare. 

Germany expects to be in better shape after the war 
than any other European country. Russia, economically, 
she expects will be her province. The neutral European 
countries, irrespective of where the sympathies of their 
peoples may lie, were Germany's economic allies during 
the war, and will continue to be markets of supply and 
demand for Germany. 



CHAPTER III 

Germany's peace plans during war 

Open and Underhand Methods — Transition Economy — 
Institutions for Industrial Concentration — Raw Mate- 
rials and Shipping — Foreign Exchange — Germany's 
Continued Power in Foreign Countries — Organisation 
Needed to Meet Organisation — German Methods Dif- 
fer in Different Countries. 

Germany's preparations for peace fell into two 
classes, those that were more or less open and straight- 
forward, and those that were distinctly underhand. It 
is the existence of the latter that makes it imperative for 
American business men to plan energetic measures for 
trade protection. But, first of all, the open and above- 
board, preparations — "above-board" being, of course, 
something of a euphemism, for Germans, in all their 
national and State-promoted activities had been getting 
far away from old-time fair-play methods. 

As in time of peace Germany had made ready for the 
immediate turn-over of the whole national existence to 
the war footing, so in time of war she was diligently 
preparing for the passage from the "economy of war" 
to the "economy of peace." An Imperial Commission 
for the "transition establishment" — the Uebergangswirt- 
schaft — was appointed by the Federal Council of the 
Empire. 

The President of the Commission and its members 

117 



118 AMERICA IN WORLD MARKETS 

were, according to a decree of the Federal Council, to 
"have the right to examine the correspondence, the reg- 
isters and the books of the commercial houses and to 
visit their warehouses." 

Herr Stahmer, one of the most noted of the Ham- 
burg men, was appointed President of the Commission. 
He had been closely associated with the German military 
administration from the beginning of the war and had 
held the important position of civil governor of Antwerp. 
Herr Stahmer is also known as the guiding spirit in lay- 
ing the plans for the "economic penetration ,, of the 
United States. His two chief lieutenants were the late 
Albert Ballin and Herr Huldermann, also of the Ham- 
burg-American Steamship Company. Huldermann was 
his chief mouthpiece. 

Germany made no mistake about the difficulty of the 
problems that the transition would involve. The world- 
wide antipathy which German atrocities aroused was re- 
garded as one of the merely minor obstacles to be faced. 
The revival of shipping, the providing of the raw mate- 
rials for industry, the quick "economic penetration" of 
foreign markets were the questions they considered of 
prime importance. It is significant that the Germans 
viewed the whole matter in terms of competition and that 
the Commission's work was popularly referred to as 
preparation for the "trade war," the other war which was 
to begin when the war of blood ended. 

Before the Imperial Commission was established, an 
"institution for industrial concentration" was organised 
by "private individuals," under government auspices, for 
the purpose, as it was stated at the time, of giving "bet- 
ter support in the future to competition with foreign 
countries, whether this military war is to be followed 



GERMANY'S PEACE PLANS 119 

by an economic war, or whether the needs of commerce 
and of life will impose their pacific exigencies on those 
peoples who are now our enemies. ,, This was the be- 
ginning of the intensive syndicalisaaon of German in- 
dustries. The founding of the Imperial Commission rep- 
resented the formal taking over by the Government of 
the work that was being attempted by this "private in- 
stitution.' ' The explanation given was that, as the State 
had been regulating to a constantly greater extent, not 
merely the providing and distribution of foodstuffs, but 
also imports and exports and prices and rations of prod- 
ucts of all kinds to merchants and manufacturers, it 
was natural that the State should prepare to intervene 
in after-war commerce by means of an organisation that 
should gather and distribute commodities and should 
regulate traffic of all kinds and direct the principal ac- 
tivities of industry and commerce. 

The first problem for the Imperial Commission was 
stated to be that involved in the procuring of raw mate- 
rials, for the industries of Germany as well as for the 
sustenance of her people, and shipping to carry them. 
German trade publications were quick to point out ob- 
jections to the State assuming this role, on the ground 
that it would interfere with the freedom of commerce. 
Herr Huldermann swept aside these objections. The 
State knew where it would get the raw materials, and 
the Commission, it was stated, would co-ordinate the ex- 
igencies of industry with the shortage of tonnage, and 
would obviate the confusion which private enterprise 
would involve. 

The Commission was to lay down the rules according 
to which German industries were to obtain their supplies 
from abroad. To this end the leading firms engaged 



120 AMERICA IN WORLD MARKETS 

before the war in the importation of raw materials were 
to be brought into a single organisation. It was stated in 
the German press that branches of this organisation had 
been established in Hamburg, Bremen and Dantzig. 
From this organisation were excluded the firms that 
"are not financially strong or that are suspected of being 
inclined to indulge in speculation or profiteering. " Here 
many small importing houses raised their voice in pror 
test at being excluded from the organisation, which they 
denounced as a scheme on the part of the big firms to 
freeze them out and to establish a great trade monopoly, 
but only passing attention was given to their protests. 

The mode of regulating the carrying of freight from 
abroad to German ports, rapidly and at lower cost, was 
to be determined by putting the German steamship com- 
panies directly under the control of the Commission and 
by making all foreign carriers deal directly with it. All 
arrivals and departures of ships for an indefinite period 
after the war were to be under Government control. 

Freight rates were to be fixed by the Commission, but 
German manufacturers received notice that, as the ship- 
ping industry had suffered severely during the war, rates 
would have to be fixed to allow the shipping companies 
to recoup some of the past losses, especially in carrying 
products for the non-essential industries. The distri- 
bution of imported products among the various indus- 
tries would, it was admitted, present some difficulty, and 
the Commission, it was announced, would eliminate all 
bickerings by preparing a schedule showing the average 
importation by the various firms in the years preceding 
the war and thereby regulating allotments. This was 
regarded as a sop to the small firms which had been pro- 



GERMANY'S PEACE PLANS 121 

testing, but it was understood that it did not allay their 
alarm. 

Another problem which the Commission undertook to 
handle was foreign exchange. With imports at the maxi- 
mum for a period after the war and exports at a mini- 
mum, it was foreseen that German funds would need 
support. Various expedients were to be resorted to and 
it was intimated that all foreign securities in the hands 
of German subjects would be seized to make payments 
abroad. 

Later on the work of the Commission was taken over 
by the newly formed Ministry of Economics. 

To meet the German peril, as has been said, it will be 
necessary for American business to acquire an accurate 
idea of the seriousness of that peril. This will be done 
only by learning its ramifications, its world-wide dissemi- 
nation, its remarkable organisation, and its insidious 
working methods. 

When the Allies began to call last year on the 
100,000,000 bushels of wheat in Argentina and the move- 
ment of the grain from the interior to the sea coast was 
started, on a word of order from Germany railroad 
tracks were dynamited, cars were burned and strikes 
effectively interfered with the handling of the grain. 
This was in Argentina, thousands of miles away from 
supposedly harassed, hungry, war-weary Germany. 

In England, German agents were accidentally surprised 
in the act of securing valuable coal mines, which, if the 
transfer had been effected and gone through undiscov- 
ered, would have been working for Germany even dur- 
ing the course of the war. England did not succeed in 
surprising the German agent, Hugo Schmidt, in the act 
of supplying Germany during the war with jute, wool 



122 AMERICA IN WORLD MARKETS 

and cotton, largely from British territories and using 
London banks in the process. It was the United States 
that made the discovery in this case, and it was only the 
indiscretion of the German agent, in keeping records of 
the transactions in his New York Office, that permitted 
the facts to become known. 

During three years of the war Germany was drawing 
great supplies of metals from the United States, while 
all the time we were speculating on the exhaustion of 
her metal resources and on the "substitutes" she must be 
using for copper and other necessary metals. We now 
know also that large quantities of materials were being 
stored up in this country for shipment to Germany after 
the war. 

Is there any reason to believe that the Germans will 
spontaneously abandon their already successful system 
of spreading the prestige of Germany in world mar- 
kets at the expense of the United States, of taking orders 
abroad, then buying the merchandise in the United 
States, carrying it to Germany and reshipping it to the 
foreign purchaser as German wares, and thus paving 
the way, through high-class products, for the later intro- 
duction of cheap, inferior German manufactures? 

What will America do to meet any such organised 
"trade war" as Germany had planned? Utterly repug- 
nant would be a counter-organisation for trade war. 
Whatever the outcome might be, there are certain paths 
on which Americans could not engage. But the advan- 
tages which can accrue from an organisation of the Ger- 
man kind should compel American business men to take 
measures jointly for their own protection. Sooner or 
later indeed we may expect that American business will 
organise to forestall the application of German methods. 



GERMANY'S PEACE PLANS 123 

They will need agents to ferret out the whole iniquitous 
system. 

Germany's secret trade methods were different in Italy 
from what they were in France or Denmark or in Ar- 
gentina, and different in those countries from what they 
were in the United States or China or Australia. The 
organisation which American business will have to es- 
tablish to cope with the German type of trade evil will, 
therefore, have to face differing problems in the various 
countries and will necessarily be conceived on a broad 
and comprehensive scale. 



CHAPTER IV 

HOW COUNTRIES WERE EXPLOITED 

Denmark's Free Port — Germans Used It to American 
Detriment — How the Dye Combine Imposed Itself 
on France — Italy Still in Danger of German Clutch 
— Turkey and Russia under German Economic Dom- 
ination — Rights Abroad Which American Business 
Has Now Acquired by Actual Purchase. 

Copenhagen has a free port, which proved to be an 
important source of revenue for Denmark, but a far 
greater benefit for Germany. The parked-off area con- 
tains a number of "lagers'' or warehouses. Ships' car- 
goes and shipments in bulk from America and other dis- 
tant countries, destined in whole or part for lands other 
than Denmark, are unloaded at the free port, deposited 
in the lagers and there divided up for distribution and 
reshipment to Sweden, Norway, Russia, Germany, the 
Balkans and other destinations. 

The lagers where the merchandise is housed while 
awaiting reshipment have been for the most part con- 
trolled by Germans — by German firms or firms employ- 
ing German agents, or Scandinavian concerns with Ger- 
man affiliations. When the machines and manufactured 
articles from America leave the free-port lagers and are 
put aboard German steamers and those of other nation- 
ality for conveyance toward the country of consignment, 
they frequently have suffered considerable transforma- 

124 



HOW COUNTRIES WERE EXPLOITED 125 

tion. Instances have been verified where German in- 
scriptions have replaced those originally appearing on 
the products, and the credit that belonged to America 
and other countries of origin was greatly diminished, if 
not entirely lost. 

Denmark cannot probably be held to account for what 
goes on in the free-port lagers, and it can hardly be con- 
sidered a matter for Government representations. Amer- 
ican business men must take their own measures for the 
protection of their rights. An obvious step for them to 
take is the appointment of agents to watch the operations 
at the free port, to trace merchandise from the home 
waters to final destination and see whether it is as truly 
American at the end of the voyage as it was at the start, 
or whether it has not changed its nationality at the Dan- 
ish way-station. 

Each foreign country has its individual German prob- 
lem directly interesting American trade. The great de- 
velopment of the dye industry in the United States has 
brought with it expressions of misgiving regarding its 
future when it is faced once more with German compe- 
tition. A glance at some of the German methods with 
regard to dye competition may prove instructive. 

In France the domestic dye industry was of consider- 
able importance. The leading dye plants were in the 
neighborhood of Saint Denis, the controlling companies 
having their headquarters in Paris. A day came when 
agents of the German dye combine approached the 
French manufacturers with a proposition. "We are de- 
veloping our foreign trade," they said in substance, "and 
we are in a position to come into the French market in 
a big way. But we Germans are frank and loyal; we 
desire to be fair, to be even generous. If you will make 



126 AMERICA IN WORLD MARKETS 

an agreement with us, we shall be glad to leave you two- 
thirds of the French market and to take only one-third 
of it for ourselves. Of course if you do not make the 
agreement, we cannot promise to keep our hands off 
the other two-thirds also." The agreement was made. 
The amiable old French Senator who was one of the 
leaders of the industry in France was in revolt, but he 
was voted down. 

So the Germans went into the French market in their 
frank and simple manner and loyally they notified the 
Frenchmen, in accordance with the agreement, of the 
names of the French dye consumers to whom they were 
selling and the quantities sold — that is loyally for the 
first two or three months. Then they ceased to be heard 
from, and the Frenchmen began to learn that German 
dyes were being sold in France in quantities that obvi- 
ously were passing the one-third limit set by the agree- 
ment. Remonstrances were unheeded, but when, at the 
end of the year, the German dye combine held its meet- 
ing, accounts were compared, and it was shown that con- 
siderably more than one-third of the French demand had 
been supplied by the Germans, the latter again were 
frank and loyal. "It is true," they said, "that we ex- 
ceeded our allotted share; but what does it matter? We 
shall allow to you French dye manufacturers the profits 
on the part that exceeded one-third. You are thus ac- 
tually better off than if you did the business yourselves. 
You are getting the benefit of two-thirds of the trade 
without having to do two-thirds of the business." And 
the Germans continued to encroach in a constantly 
greater way on the French share of the trade in France. 

The three years' agreement had not run out when the 
war began, and one can only surmise whether if there 



HOW COUNTRIES WERE EXPLOITED 127 

had been no war, the Germans would have renewed the 
agreement or would have presented a new and less fa- 
vorable proposition to the Frenchmen. It should not 
be forgotten that materials for the dye industry are ma- 
terials also for the manufacture of explosives, and that 
the less dye business the French manufacturers were in- 
duced to do, the less prepared would France be to con- 
vert dye factories into explosive plants. It would be su- 
perfluous to point out to the dye manufacturers of this 
country and to its business men generally the lesson of 
this incident, regarding which all parties concerned 
maintained a discreet silence, or the importance of their 
taking action to unearth and circumvent the German dye 
combine. 

Italy as a foreign market is in danger of coming again 
under the economic clutch of Germany, if her prayers 
for co-operation from America and from the Allies are 
not hearkened to. The heavy German investment in Italy 
has not by any means been entirely confiscated. As in 
our own country, much of it has been hard to get at. 
Transfers of property and of businesses executed in the 
nine months between the beginning of the European war 
and Italy's entry into it, as well as the claims of Italian 
citizenship by leading "German" bankers and of Swiss 
paternity for German companies operating in Italy has 
left German commercial property in Italy to a large ex- 
tent intact. For this reason Italian merchants and manu- 
facturers continue to be anxious over the future of the 
nation's commerce. What adds to their concern is the 
fact that the populace of Italy view the German with 
relative indifference. They hated Austria, their national 
enemy, but they can be stirred to no special dislike against 
Germany. To the Italian common people the German 



128 AMERICA IN WORLD MARKETS 

is rozzo, clumsy and coarse, whatever his mental quali- 
fications may be. The opposite of rozzo is fino, intel- 
lectually sharp and cunning. The Italian can hate, or 
fear, or respect a person who is fino, but can feel little 
more than contempt for one he regards as rozzo. The 
Italian masses loathed the Austrians, and even in times 
of peace no feast day celebration in an Italian city was 
complete without a demonstration of hostility before the 
Austrian consulate, but, despite the revelations regard- 
ing Germany's trade control in Italy, all efforts have 
availed little to create a patriotic sentiment of hostility 
against the German commercial invader, whom they con- 
tinue to regard as merely rozzo. Italy's merchants are 
therefore under the apprehension that the conclusion of 
peace may see the German readily resume his former 
place in the popular estimation and take up his commer- 
cial activities in Italy with greatly intensified vigor. 

It was only a short time before the European war that 
the Standard Oil Company of New York had completed 
long-drawn-out negotiations with the Government of 
Turkey and had obtained dock and wharfage fran- 
chises at Constantinople and made elaborate plans in the 
interests of its Rumanian oil properties and of newly ac- 
quired territory, believed to be oil-bearing, in Bulgaria. 
The transactions were kept as confidential as possible but 
presently all the German powers on the ground began 
war on the American corporation. The local represen- 
tative of the Deutsche Bank, the chief fiscal agent of 
the Rumanian oil properties financed in Germany, and 
the late Baron Hans von Wangenheim, the worthy pre- 
decessor of Count von Bernstorff as German Ambassa- 
dor at Constantinople, brought their bludgeons to bear 



HOW COUNTRIES WERE EXPLOITED 129 

and the Standard Oil Company was ousted bag and bag- 
gage. The American corporation saw no recourse but to 
accept the situation philosophically and keep quiet. 

Russia, a land of immense natural resources, hith- 
erto barely scratched, was regarded by the enterprising 
merchants in every country as a land of promise com- 
mercially. But Russia, even before the war, was grad- 
ually being enveloped by the grip of the German trader- 
diplomat. Most of the manufacturing industries in 
Russia of a modern kind were directed by Germans, if 
not actually controlled by them, to the point that, wher- 
ever German competition made it possible, no other for- 
eign machinery manufacturer or exporter of raw mate- 
rials had much chanct against the German. Other coun- 
tries were loaning the money to Russia which the Ger- 
mans were using in the industries, not primarily for the 
benefit of Russia, but for their own benefit and that of 
the Fatherland. American producers of manufacturing 
machinery in those days were mystified over the difficul- 
ties they encountered in getting into the Russian market, 
and when they began to surmise that the German factory 
heads were the chief obstacle, a ruse was adopted to throw 
them off the scent. All at once the German superintend- 
ents and managers became "Poles," friends of America, 
willing to further American trade. The ridiculous decep- 
tion allowed the Germans to hoodwink many foreign 
exporters. 

The enumeration would be long, even tedious, of the 
trade tactics of Germany in the various European coun- 
tries to a participation in whose commerce the United 
States will after the war have acquired — by actual pur- 
chase — an increased right. The aim in entering into 



130 AMERICA IN WORLD MARKETS 

these details is to indicate some of the less-known prac- 
tices so that American business men may be aroused to 
the urgency of taking combined action for the safeguard- 
ing of American trade. 



CHAPTER V 



THE GERMAN CARTEL 



The Science of Industrial Combination — The Cartel De- 
veloped by Evolution — Government Enters as Part- 
ner — Dumping Carried Out with All the Power of the 
State — When German Locomotives Were Imposed on 
Italy and France — Foreign Imitations of American 
Machinery — Agriculture Also Preyed Upon. 

Germans have boasted that in the matter of scientific 
organisation for commerce the whole world would 
sooner or later follow the German example. When other 
nations derided the merchandise with the more or less 
opprobrious label "Made in Germany," the Germans, 
though they did not take it with good grace, went ahead 
with their carefully planned campaign and profited to the 
full of the opportunity which the negligence of others, 
the consequence of self-satisfied superiority, furnished 
them to disregard the generally accepted international 
rules of equity and fair dealing. They extended their 
commercial sway into all markets; their system was en- 
circling the globe. The German employe was in the 
counting-houses of Paris, London and New York and in 
the commercial bureaus of every leading city in the world. 

We had rather stringent laws regulating the conduct 
of business by our own people but we overlooked the 
need of making laws to prevent Germany from pursu- 
ing her bandit operations in fields of commerce in which 

131 



132 AMERICA IN WORLD MARKETS 

we had eminent domain or at least legitimate interests. 
We were long in awakening to the tremendous physical 
power which Germany developed in a half-century of or- 
ganising to crush the nations of the world by brute force. 
We are very far even to-day from realising the powerful 
economic hold which Germany in the decades during 
which we were slighting her efforts had fastened on the 
world's markets. 

With profound repugnance we were forced to fight 
back at Germany with liquid fire and poison gas. To 
fight back in the realm of commerce are we going to be 
forced to abandon our traditions of individual freedom 
in trade, to submit to disciplining and dragooning in the 
handling of our commerce? Our banking systems, our 
transportation, our industries, our whole scheme of com- 
merce and of trade development are interested in the an- 
swer. Railways, shipping, banking, materials and man- 
ufactures were mobilised in the United States for the 
war. Will they have to be mobilised again if Germany is 
restored to her commercial position, or is allowed to con- 
tinue the process which had made of her a world menace 
no less in commerce than in military might ? Will it be 
possible for the free peoples to put a stop to the methods 
that gave her ascendancy, or will they in self -protection 
have to adopt the German system of concentrations and 
of trade espionage? The facts regarding the German 
organisation of industry and commerce demand careful 
investigation, quite irrespective of the troubles that may 
temporarily beset the German state. 

Frequent mention is made of German cartels and mo- 
nopolies and many business men in America have come 
to regard them as the bugbear, the root of the German 
cancer in the commerce of our time. Only a hazy no- 



THE GERMAN CARTEL 133 

tion, however, of what the German cartels and monopo- 
lies are, is generally to be found, and this very vagueness 
of knowledge seems to add to the apprehension with 
which the subject is viewed. 

One reason for confusion is due to the fact that the 
cartel is not a stable and fixed entity or conception. 
There may be several cartels in one and the same indus- 
try, and each industry handles its cartels in accordance 
with its own peculiarities and requirements, so that car- 
tels may be as varied as the industries to which they 
apply. Another source of confusion lies in the fact that 
there are many forms of industrial and commercial com- 
bination in Germany's economic life, and that a partic- 
ular kin4 of combination is alluded to in Germany by 
different names. 

The monopoly, of course, implies exclusive State con- 
trol. The petroleum monopoly plan of half a dozen years 
ago, the most notorious of the German monopolies, be- 
cause it was conceived as a treacherous violation of 
American rights and interests, reserved to the state the 
sole right to sell petroleum and its products, although the 
financing of the sales monopoly was entrusted to a "con- 
sortium" of German industrial banks. A "consortium," 
it need hardly be said, is a union of banks or of indus- 
trial, commercial or agricultural concerns, to underwrite 
or to handle a given enterprise. "Community of inter- 
est" agreements and trusts, as we know them in the 
United States, are existent in Germany, as well as com- 
bines in which the State itself participates, whether as 
partner or controller. But different from all of these 
is the cartel. And the cartel — known differently as "Kar- 
tell," "Syndikat," "Verband"— has come through a 
process of evolution and had become a very different 



134 AMERICA IN WORLD MARKETS 

thing from what it started out to be in the middle of the 
last century. 

The potash syndicate of fifty years ago, like the metal 
syndicates of that period, when the German states were 
not yet a factor in world commerce, was merely a union 
of potash producers for the purpose of fixing prices, lim- 
iting production and ascribing territory to the members 
of the syndicate. The potash syndicate of recent years, 
as the American fertiliser companies know by bitter 
experience, was a very different kind of cartel, as it had 
at its head the German State, and as its aims were not 
commercial alone, but political to a high degree. It was 
in that respect typical of the modern German cartel, as 
also in the fact that no commercial contracts into which 
it entered were sacred or binding beyond the rule of ex- 
pediency, since it always considered itself free to break 
faith on the pretext of the State's monopolistic rights 
and the latter's prerogative of violating bargains. Ger- 
man good faith — "Deutsche Treue" — went by the board 
when the German State entered as a partner into impor- 
tant German industries. 

In the early days the cartels had no easy time of it. 
They were denounced for stifling competition and goug- 
ing the consumer by artificially keeping up prices. The 
infant industries pleaded for a chance to grow. The 
cartels, they claimed, were "children of necessity. ,, The 
German States variously tolerated them, legislated against 
them, or half-heartedly encouraged them. When Prus- 
sia had successfully consummated her atrocious plots 
against Denmark, Austria and France, and the Empire 
was formed and Germany started on her great career as 
an industrial State, the cartels entered on a new phase. 
So rapid was the growth of the industries and so de- 



THE GERMAN CARTEL 135 

termined was the German policy of industrial expansion, 
irrespective of the temporary question of supply and 
demand, that means had to be found to take care of the 
German surplus production at times when it had far 
exceeded available facilities for its absorption. It was 
then that the German policy of dumping came into being. 

The cartel was the parent of dumping — this English 
word has now been adopted into all the languages of 
Europe to indicate specifically the German policy of or- 
ganised underselling in foreign markets. A bill was re- 
cently introduced in the Italian Chamber of Deputies 
with the short title "Antidumping," a word which is 
self-explanatory in every European country to-day. The 
German cartel of this period was a combine within an 
industry to safeguard the home market by throwing ex- 
cess production on foreign markets. In some cases the 
cartel had a selling organisation, a "Verkaufs-Bureau," 
which undertook the disposal of the surplus product, and 
in others the members of the cartel individually sold their 
own product in the territory allotted to them, at the price 
fixed and in the quantity predetermined. As there was 
no general inclination to rely on the good faith of the 
individual members, arrangements were made for spy- 
ing on their operations and fines and penalties were fixed 
for violations of the prescriptions of the cartel. 

Sometimes the spies and "inspectors'* were bribed and 
the seller found it to his financial advantage to pay the 
fines and sell more than his share or at higher prices 
than those fixed, and then the cartel levied heavy penal- 
ties, or invoked the power of the State, or saw itself dis- 
organised or disrupted. Honest adherence to the rules of 
the cartel was not always in evidence, but German dis- 
cipline usually prevailed and, while occasionally a big 



136 AMERICA IN WORLD MARKETS 

concern like Krupps sidestepped the cartels, or a man 
like August Thyssen broke away and became a coal, iron, 
railway and shipping syndicate all in himself, the gen- 
eral run of the German producers of the elementary 
products of the kind suitable for syndication were kept 
in line and the cartels grew in importance with the in- 
dustrial growth of Germany. 

The State was not yet wholly with them, for the Ag- 
rarians, an integral part of the autocratic government, 
were still resentful of all special favors for the indus- 
trial party. The Military Party, however, finally were 
brought around to the view that the spread of German 
dominion over the world depended no less on economic 
penetration abroad than on victories by Germany's 
armies in the field, and from that time on there was as- 
sured to the cartels all the weight of government backing. 
The cartel was revealing itself as a potent weapon for 
commercial expansion in a way that had not been fore- 
cast for it in earlier days. The trade colleges and the 
commercial universities were working out the Great Gen- 
eral Staff problems for the commercial campaigns for 
conquest of the world's markets. The cartel loomed 
up as among the most efficient means of giving assured 
results to this end — the cartel renovated, improved, mod- 
ernised. It offered the means of crushing ruthlessly, 
relentlessly, brutally, the competition of rival commer- 
cial powers. 

The old cartel, whose members represented only a 
section of an industry, syndicating only a limited part of 
their own product, was dead. The new cartel was as 
different from it as the power vehicle of to-day from 
the ox-waggon of a past century — an organisation with 
a complex intertwining of banks and of industries co- 



THE GERMAN CARTEL 137 

related with the industry forming the object of the Ver- 
band, and with the State and its controlled organisms 
taking a direct and active interest. 

A proving ground was at hand for the theories of the 
German professors of commercial science. Italy, a new 
nation without a developed industrial and commercial 
life, was a fallow field for the Germans to try out their 
schemes for commercial conquest. And the schemes 
worked. The German cartels crushed all opposition. 
Their approach to the market which they decided to in- 
vade was methodical and thoroughly organised. 

No sacrifice in underselling was considered too great, 
no labor too arduous once the task was undertaken of 
securing exclusive position in Italy for a given series of 
German products. The task was all the easier because 
the risks and incidental losses fell only in small measure 
on the cartel interested in the particular case. Suppose 
the German locomotive industry resolved to overwhelm 
American, British and other competition. The cartels 
in that industry decided on the prices, considerably below 
cost, that would certainly get the business, and the whole 
organisation of co-ordinated cartels was notified. Those 
of coal, steel, iron and the other industries that supplied 
materials to the locomotive factories, were instructed to 
make to the latter a reduction allowance on the materials 
entering into the locomotives for Italy proportionate to 
the reduction of price which it had been necessary to 
make to win the Italian market. The arrangements for 
the allowance would be arranged by the Abrechnungstelle, 
a special accounting bureau for the cartels. The German 
banks would finance the transaction, the German am- 
bassador in Rome would attend to the introductions, the 
German Government would carry all shipments free on 



138 AMERICA IN WORLD MARKETS 

the State railways and would pay on the exported loco- 
motives a special export bounty far in excess of the two 
marks per ioo kilograms which it allowed on manufac- 
tured metal products made in Germany and sent abroad. 

The locomotive transaction was worked by the Ger- 
mans even in France. In the whole operation it was not 
so much the locomotive Verband that was carrying 
through a deal ; it was the German government that was 
imposing German locomotives on foreign markets — with 
all urbanity of method, of course, but with the exercise 
of all its influence and by the use of all the resources at 
its command. 

The whole German State was taxed to further the 
economic invasion of foreign markets through dumping 
by the cartels. The home market for the product which 
was being dumped was closed and carefully protected 
against the outsider, and the cartel interested was author- 
ised to raise temporarily its home prices. When German 
locomotives were being sold below cost in Spain the State 
agreed to an increase in price on a corresponding number 
of locomotives to be delivered to the German railroads. 

German industrial machinery and machine tools are 
almost in their entirety an imitation of American ma- 
chines and tools, frequently in violation of American 
patent rights, and almost invariably they are a very in- 
ferior product, yet Germany before the war was selling 
to France more than five times as much — in money value 
— machinery and machine tools as was the United States. 

Dumping extended to agricultural products as well as 
to manufactures. Germany with a grain production in- 
sufficient for her own requirements, was actually a heavy 
exporter of grain and flour. The German importer of 
grain received from his government a certificate, an 



THE GERMAN CARTEL 139 

"Einfuhrschein," which represented the duty he had paid 
on the grain he had imported, which duty would be remit- 
ted in case he exported grain or cereals that would bear 
import duties of equal value if imported. The certificates 
were transferable and negotiable and were traded in on 
the grain and produce exchanges of Germany. The dif- 
ference between prices on the home market, less the im- 
port duty, and prices on the foreign market, often fur- 
nished a basis for profitable transactions, but the chief 
value of the system was that it penalised the foreign 
source of supply to Germany and permitted the Germans 
to assume a measure of control on the foreign product, to 
the extent that Germany controlled several of the mar- 
kets of northern Europe in flour made from wheat grown 
in Russia. 



/ 



CHAPTER VI 

THE "CHAIN" METHOD OF EXPANSION 

Concentration of Industries Facilitated Expansion 
Abroad — Germany Controlled Foreign Enterprises 
through a Minority Interest — Great Corporations 
Started a "Chain" Which Constantly Lengthened-— 
How Local Owners Were Ousted from Own Proper- 
ties — The "Chain" in Italy, Spain, France and Other 
Countries. 

Before the war the great German corporations had 
not aimed at eliminating competition entirely. In the 
neighborhood of Frankfort-on-Main, of Mannheim, of 
Ludwigshaven, the big members of the dye-stuffs com- 
bine, the Farbewerke Hoechst, Leopold Casella, the Bad- 
ische Gesellschaft, allowed a number of small plants to 
flourish unmolested, handling specialties in aniline prod- 
ucts which were not important enough to bother with, or 
working under new processes that had not been developed 
to the point where the big concerns desired to take them 
over. Small independent companies were also engaged 
in shipping on the Rhine and other rivers and canals and 
in the Baltic, and there were also small firms in the coal, 
steel and iron and electric industries, in the import and 
export business, and even in businesses subsidiary to 
arms and munitions production. 

At least a pretence of encouraging competition was 
in recent years the policy of the German State, which in 

140 



THE "CHAIN" METHOD OF EXPANSION 141 

this regard had passed through many stages of relation- 
ship to the combines and cartels or syndicates and the 
public who dealt with them. In recent years it was play- 
ing the double part of protector of the oppressed and at 
the same time patron and partner in the great oppressive 
combinations. 

The war, to a large extent, swept aside the policy of 
pretence, for the State ceased to act merely as a partner 
in the combinations. It undertook their direction; it 
forced concentration by closing smaller factories and 
transferring their machinery and their operatives to the 
larger plants. 

Into the lap of the great industrial corporations were 
poured the fat contracts, the opportunities for huge 
profits, power, influence, independence of restrictive legis- 
lation. The aristocrats of the sword and of the land had 
united with the aristocrats of industry. Leaders of the 
great Reichstag parties, Militarists, National Liberals, 
Agrarians, Centrists, Social Democrats, were part and 
parcel of the great combines, industrial, commercial and 
financial. Krupps, Bayer, the General Electric, Siemens- 
Schuckert, the Duisberg Maschinenfabrik, the Daimler 
Motor Company, the Deutsche Waffen-und-Munitions- 
fabrik, the Deutsche Bank, the Disconto Gesellschaft, the 
Hamburg-American and the North German Lloyd 
Lines, and several others were all interlocked and par- 
ticipated in by those governing Germany. All business 
worth having was theirs for the taking. Their power 
over the resources and opportunities of the German 
Empire was unlimited. 

In the great industrial combine was largely vested tlie 
civil government of the German people for the purposes 
of the war. Among the members of the combine were 



142 AMERICA IN WORLD MARKETS 

subdivided important functions other than those for 
which their corporations more specifically existed — the 
direction and control of the press, the acquisition and dis- 
tribution of foodstuffs and other necessities, the hand- 
ling of raw materials, the mobilisation of labor, the fix- 
ing of wages, the decisions on taxations and financial ar- 
rangements generally. 

Is this mighty organisation of concentrated adminis- 
trative and industrial power to be continued after the 
war? It was planned also for after-war purposes. What 
a weapon it would be when the other nations had relaxed, 
and their war combinations were dissolved. 

How influential the large German industrial and com- 
mercial combines are in the world's commerce is only in- 
adequately gauged by consideration either of their capi- 
talisation or of the business of the plants which are con- 
ducted under their name. German business has been suc- 
cessfully concealed from the world through a system of 
co-ordination, of subsidiary plants and companies, which 
has come to be described by economists as the "chain" 
method. Furthermore, the Germans cleverly worked out 
a way of obtaining control of important corporations in 
other countries without having a majority ownership of 
them. Thus in the Oriental Railway Bank, the head 
office of which is in Switzerland, the board of directors 
comprised eight Germans, five Swiss, one Frenchman, 
one Belgian and one Austrian. This important financial 
institution, which was generally classed as being Swiss 
and not German, was entirely controlled by the Germans 
and was conducted in the interests of Germany, In like 
manner industrial corporations, like the Aluminum Com- 
pany of Neuhausen, which had on its board eight Ger- 
mans, six Swiss and one Austrian, might really be con- 



THE "CHAIN" METHOD OF EXPANSION 143 

sidered German corporations, although Switzerland and 
other countries take the nominal credit for their exist- 
ence. 

The German "chain" method applied principally to 
corporations that were started from Germany itself. The 
parent corporation undertook the establishment of a 
branch, say, in Italy or in Russia. Through German 
banks it contributed part of the capital, the rest being 
obtained from local sources, and this branch in turn 
founded other branches in the same way, the Germans 
controlling the entire "chain," although the business was 
conducted mainly with other people's money. Where a 
"chain" had been established competing companies of 
local capitalisation and management were often forced 
under the German control. By acquiring blocks of stock 
of these companies in the open market the Germans 
gained a right to a share in the management and then, 
through pressure from affiliated banks, they generally 
succeeded in taking over the entire direction. As they 
usually supplied also the latest engineering principles and 
technical skill and showed the ability to make business 
increasingly profitable, they readily entrenched them- 
selves in possession. 

Signor Negri, founder and president of the important 
Italian electrical establishment which bears his name, told 
a lamentable story before a court martial in Genoa, de- 
scribing how the Germans secretly bought into his com- 
pany, gradually Germanized it, and finally ousted him 
from any share in the control, although he continued to 
be a large stockholder. The German corporation which 
had turned this trick was the German General Electric, 
the Allgemeine Electricitats Gesellschaft. This corpora- 
tion began by establishing in Zurich a "Bank for Elec- 



144 AMERICA IN WORLD MARKETS 

trical Enterprises' ' which is commonly referred to as the 
"Elektro Bank" of Zurich. It has been proved that this 
bank was owned by the German General Electric and the 
Deutsche Bank. It founded in Genoa the Officine Elet- 
triche Genovesi, the Genoese Electric Plant, which com- 
pany in turn founded the Genoa Electric Tramway 
Union, the Electric Power Plant of Spezzia, the Adriatic 
Electric Company, which serves the eastern Italian coast 
from Friuli to Bari, the Electric Company of Massa Car- 
rara and the "Company for the Development of Electric 
Enterprises in Italy." 

The same German General Electric Company estab- 
lished a branch company in Barcelona, which in turn 
created ten companies in various parts of Spain, and soon 
had control of nearly three-fourths of the electric power 
of that country. It also bought into some of the exist- 
ing light and power plants of France to the extent that 
in some French cities, including such important shipping 
centres as Nantes and Rouen, it had obtained control of 
the local electric plants. 

The managing directors, engineers, superintendents, 
cashiers, auditors of all these companies have been Ger- 
mans, frequently disguised as "Swiss" or "Alsatians." 
In name the subsidiary companies are Italian, Spanish, 
French and so on. For legal purposes they are in last 
resort Swiss, since the control of their stock is owned by 
a bank with "social domicile" in Switzerland. It is no- 
body's business in international law that this Swiss bank 
is really owned in Germany. 

Similarly for the important German combine of elec- 
trical and other machinery manufacturers whose principal 
name is Siemens-Schuckert. This concern founded, as 
its chief controlling branch for Italy, the Societa Italiana 



THE "CHAIN" METHOD OF EXPANSION 145 

di Elettricita Siemens-Schuckert of Milan, which rapidly 
established subsidiary branches in the cities of Genoa, 
Naples, Florence, Palermo, Alessandria, Pisa and Per- 
ugia. Before Italy declared war on Germany all business 
with these branches was conducted directly from Berlin. 
Afterwards the relation was indirect, through a con- 
trolled bank in Switzerland. All correspondence, all doc- 
uments and all reports were made out in the German 
language. The trail of the Siemens-Schuckert may be 
followed into every corner of the globe. The S. S. Com- 
pania Espanola de Electricidad and the S. S. de La Plata 
hide the obtrusive Teuton name under initials. There 
are more or less disguised Siemens-Schuckert companies 
in Belgium, Denmark, Russia, Portugal; in the cities of 
Bucharest, Cairo, Chemulpo, Han-kow, and in innu- 
merable other places. 

The foreign business of the dye and chemical indus- 
tries of Germany was propagated in the same insidious 
manner. The Badische company owned the French fac- 
tory at Neuville-sur-Saone, where the special dye was 
made for the red trousers of the French soldiers and from 
which a newspaper campaign was conducted against the 
abolition of the red trousers. Bayer had a plant at Flers 
in the Nord department; the Farbewerke Hoechst con- 
trolled the Parisian Company of Creil, while Casella was 
owner of the Lyons Coloring Materials Factory. In 
their branches in France the Germans carefully avoided 
all German names and chose French titles that had a dis- 
tinctly patriotic sound. 

In most foreign countries the German industrial com- 
pany had near it a bank, also under German control, al- 
though usually the German interests in it did not rep- 
resent a majority of the stock, and the funds with which 



146 AMERICA IN WORLD MARKETS 

the bank did business were only in small part German. 
The largest commercial bank in Italy was German. 

The German "chain" method applied not merely to the 
co-ordination of a series of branch establishments under 
a single industry; it was turned to account also by com- 
binations of German industries to establish subsidiary 
groups of industries abroad. It was by this use of the 
"chain" that Italy's most important port, Genoa, was 
Germanised. German companies penetrated the indus- 
tries> the commerce and the navigation to the extent that 
the Pan-Germanists openly boasted that Genoa was the 
great German port of the Mediterranean, as Trieste was 
on the Adriatic and as Rotterdam was at the mouth of 
the Rhine and as Antwerp was for the Channel. It was 
through the "chain" that Germany made Italy, Belgium 
and Russia her economic dependencies, and in this way 
also Germany was becoming the chief European market 
for many essential products. Thyssen, the coal and iron 
magnate, was working the "chain" as an individual, when 
he opened iron mines in Normandy and undertook to as- 
sume control of the coal, the railways, the shipping and 
other services of the French coast city of Caen. 



CHAPTER VII 

CONCEALING ECONOMIC STRENGTH 

The Foreign Visitor's Experience at Krupps — Keep-Out 
Signs Elaborately Courteous — German Industries Un- 
der Careful Watch — Difference of American Methods 
—Development of Central Europe Carried on Quietly 
— Important River and Canal Works and Shipbuilding. 

Whoever approached, in peace times, the outer pre- 
cincts of the great Krupp Works at Essen soon began to 
be intimidated — if at all susceptible — by the "no admis- 
sion" signs. Huge placards bore the words "Eintritt 
Verboten." Behind this front line was a "Strengst Ver- 
boten" zone, and further inward a frowning barrier of 
"Polizeilich Verboten" signs. The degrees of compari- 
son are exhausted: forbidden, most strongly forbidden, 
forbidden by the police. 

In the most advanced office behind these lines the eye 
was arrested by a large sign : "Absolutely no admission 
to any part of the works." In a second building, to 
which the visitor was conducted, the most conspicuous 
object was the sign on the wall : "Visitors will please be- 
lieve that it cannot be conceded to them to enter any part 
of the works." The director whom the visitor sought 
had his office in a third building, and on the wall in the 
waiting room a large framed tablet, hand-wrought with 
red, blue and gold illumination, made announcement to 
this effect : "We would gladly show our friends through 

147 



148 AMERICA IN WORLD MARKETS 

the works. But please do not ask to visit them. If you 
do, you will put us to the unpleasant necessity of telling 
you that this is absolutely impossible. We beg of you not 
to subject us to this embarrassment." 

And the signs meant what they said. The visitor 
might be a prospective purchaser of field guns for a Cen- 
tral American republic and have satisfactory credentials. 
He will be shown the Krupp exhibit of remote model 77- 
millimetre guns that are for sale to Central American re- 
publics, but will be informed with gravity and courtesy 
that into no part of the Werke, the factory proper, can he 
be allowed to put a foot without a special permit issued 
by the board of directors convened in meeting, and that 
might not be obtainable for weeks or even months. 

At Muhlheim on the Rhine there is an important steel 
and brass plant which one may have reason to visit. Fewer 
defensive entanglements bar the way to the general man- 
ager's outer office, but once arrived there the visitor is 
confronted with a wall sign which says, "It would afford 
us pleasure to show our friends and patrons through the 
works, but unfortunately this cannot be done. Will you 
be so good as to spare us the mortification of saying this 
to you verbally, by abstaining from making the request?" 
Here also the rule is adamant. 

You go to Diisseldorf, to Dortmund, to other centres 
in the beautiful Westphalian country, over wooded hills, 
along smiling valleys, at times in a region that recalls 
the Naugatuck Valley in Connecticut, and again in coun- 
try districts that have a charm all their own, to the peace- 
ful old-world town of Altena, on a river at the bottom of 
steep hills, to Hohen-Limburg — for all the world like a 
new and prosperous little American town — to Hagen, to 
Hamm, to a score of out-of-the-way villages, at all of 



CONCEALING ECONOMIC STRENGTH 149 

which, to your growing surprise, you find nests of fac- 
tories ; furnaces, steel and iron plants ; brass, tin, and 
nickel works, wire and nail plants and establishments for 
finished metal products of an astonishing variety and 
modernity. And everywhere, however close you may get 
to the proprietors, you find a variant of the exaggeratedly 
polite keep-out sign — "We would gladly show you the 
plant, but please don't ask us, because it will hurt us so 
much to have to refuse." 

And everywhere you will be conscious of an all-seeing 
eye — not obtrusively, for no one will molest you. Neither 
will any one make friends with you. If you happen 
inadvertently to speak in the street to a person who works 
in a factory, you may see signs of alarm promptly regis- 
tered, and it is no surprise to you when you learn that all 
the employes of all the factories scattered throughout 
this whole region are under more or less close supervision. 
If your reactions are sensitive you become gradually con- 
scious of being within the web of the German spy sys- 
tem over industry at home. If you know how to investi- 
gate you become aware that that spy system is of a mili- 
tary kind. 

Once in a while a manufacturer in the Westphalia 
region may open up, to a limited extent and for his own 
special purposes. Thus on one occasion in one of the 
small towns above mentioned the senior partner in a 
high-grade metal plant thought he saw an opportunity to 
make a large personal gain by cutting into business then 
handled by Americans. The allurement was great; he 
became communicative, even confidential. Among the 
concerns with which he was then doing business was a 
noted small arms factory in central France — not a great 
distance from Lyons. He was supplying finished parts 



150 AMERICA IN WORLD MARKETS 

for French rifles and revolvers. He showed documents 
to prove it. He had taken away the business from Ameri- 
can and British firms and he had a way of disguising the 
origin of the parts. He revealed the information as evi- 
dence of good faith. But the whole thing was a dead 
secret. The manufacturer was afraid to speak aloud. 
Only in a remote corner would he converse, and then 
nervously and in whispers. 

It is hardly necessary to emphasise descriptively the 
contrast in this regard between the German way and the 
way of other leading nations. It will be remembered 
that the opening of the war in 19 14 drew attention to 
the surprisingly large number of German reservists who 
were in the United States for the purpose of studying in- 
dustrial methods — German manufacturers' sons and other 
relatives and sons of German factory superintendents, 
over on business ostensibly of more advantage to America 
than to Germany. For the most part reserve officers or 
under-officers, they were primed with information about 
the war and its coming development and certain outcome. 
Their presence in individual instances was regarded as a 
mere coincidence and certain manufacturers laughed aside 
any suggestions of doubt as to the desirability of allow- 
ing these German experts the opportunity of familiaris- 
ing themselves with the intimate details of American 
manufacturing methods. These Germans were good fel- 
lows — a little brusque perhaps — rough diamonds — but 
they could never begin to compete seriously with Ameri- 
can manufacturers if the latter made up their mind. In 
other countries there was much the same attitude. 

Germany, while spying into the business of her com- 
petitors, had been carefully conducting her own business 
under cover. It is well, therefore, to bring into the broad 



CONCEALING ECONOMIC STRENGTH 151 

light of day that which the Germans have been at the 
greatest pains to conceal. It would be an error for 
America to remain blind to the facts that constitute Ger- 
many still a menace to the world's independence. 

The line of demarcation between military and trade 
warfare is, of course, hard to define. The one merged 
into the other. Germany planned to win the war in two 
ways. She might be trounced in the field and still be 
victorious, if her economic campaign were not set at 
naught. She had organised to pull victory out of one 
campaign as out of the other. 

She figured that if the worst came to the worst in a 
military way, she could still be victor, the war might 
prove to have been well worth while. 

Let us look through the eyes of the German leaders 
at the prospect before Germany. Before the war she 
was hedged in in a way to stifle her Weltmacht ambitions. 
Her only outlet was to the north on inland seas. Now 
she had a chance to become a Mediterranean power, by 
absorbing German Austria, her territory thus sweeping 
the centre of Europe from the North and Baltic Seas 
practically to the Mediterranean and effectively forming 
a land barrier between her recent foes and the East. Her 
$1,000,000,000 investment in Italy's commerce and in- 
dustries is only partially lost. Her great investments in 
other countries have also been to a large extent safe- 
guarded, through prudent foresight in putting them 
under the laws of other countries. Her factories and 
agencies in neutral countries are ready to pour out prod- 
ucts for the world's markets. She has accomplished one 
of her great war aims in raising a bulwark between her- 
self and Russia. Russia, if she can hereafter develop as 



lm AMERICA IN WORLD MARKETS 

a whole, may be forced to develop eastward as an asiatic 
power. But Russia can also be made eventually the prac- 
tical dependency of Germany. 

German-Austrian-Hungarian shipping interests met in 
conference at Leipzig and later at Budapest and laid the 
plans for the new waterway development. The creation 
of a mighty network of river and canal lines in conjunc- 
tion with the Danube is to be the outcome. The project 
of uniting the Danube with the Rhine by deep water 
through the Neckar and the Main rivers is well under 
way. The Elbe, the Oder and even the Vistula and the 
Dniester are to be joined also to the Danube. Ships of 
3,000 tons are to be taken as far as Budapest; 1,000-ton 
freighters as far as Ratisbon. Seven-hundred-ton boats 
now reach the upper Danube, but when the new canal 
connections are completed much larger vessels will be 
able to reach the North Sea from the Black Sea. The 
chief freight steamship construction in German shipyards 
during the war was for Black Sea and inland river serv- 
ice. How can England and Norway hope to compete 
with Germany in carrying freight from the Black Sea to 
northern Europe? The present ton-kilometre cost of 
carrying freight on the Danube is said not to exceed one- 
quarter cent, and when the canal system and river de- 
velopment is completed it is expected that this figure may 
be reduced by two-thirds. We hear much about the de- 
terioration of the German railways, but practically 
nothing about the development of the waterways. Yet 
they have been of vital importance in enabling Germany 
to withstand the pressure of her adversaries. She has 
cut off Russia from western Europe. She hopes to bar 
out the United States and Great Britain from certain 



CONCEALING ECONOMIC STRENGTH 153 

regions. Already her military economic campaign among 
the neutrals of Europe in promotion of the "solidarity of 
Continental interests" against the American and the 
Englishman is under way. 



CHAPTER VIII 

Germany's banking system 

Forced Growth of German Banking — Capital Mobilised 
to Catch Up with Commercially Older Countries — 
Comparison with English, French and American Sys- 
tems — How the Six Great Banks Grew — Government 
Representatives Made Directors — Oil Stock Promo- 
tions and Bank Rivalries — The Grossbanken and the 
Great Industrial Corporations. 

Germany's banking system is the most modern, the 
most elastic, the most enterprising of any in existence. 
Unhampered by old traditions of conservatism, it grew 
along new lines corresponding with the growth of Ger- 
many as a State. It made possible Germany's marvellous 
industrial development and her amazing commercial ex- 
pansion. Such is the German view. 

England's banking system, continued on old-fogy prin- 
ciples, has been a handicap to that country — which other- 
wise enjoyed extraordinary advantages — in the race 
among the nations during the last twenty years. France 
and America — always according to the German view — 
have to a greater or less extent modelled their systems on 
that of England. 

In these countries the banks of deposit conduct an ex- 
tremely cautious form of commercial transactions, cov- 
ering the use of funds with bullion and with short notes 
backed by unequivocal security, while giving little or no 
return to the mere depositors whose funds are utilised in 

i54 



GERMANY'S BANKING SYSTEM 155 

the transactions. The business banks and credit insti- 
tutions are hardly less conservative, furnishing, confirm- 
ing or extending credit where credit is already to a de- 
gree established and doing nothing for new development. 
The inventive genius, planning epoch-making innovations, 
or the business man of superior acumen and energy eager 
to blaze new trails and conquer new worlds, is left to 
compete in the open market for funds with the wild-cat 
promoter promising fabulous rewards for the public's 
money, which the policy of the deposit banks has failed 
to draw within their protection. 

In Germany, by contrast, the banks are all things to 
all men — deposit banks to the person wishing to keep his 
capital liquid, credit banks to the business man, and pro- 
motion banks to those seeking capital for new ventures 
or for greater expansion. The wild-cat promoter can 
have but meagre pickings where, as in Germany, the de- 
posit banks commonly pay interest to depositors of six or 
eight per cent a year. Where, as in Germany, the same 
deposit banks are the great promotion agencies of the 
State, co-operating with the Government in the united 
effort to give the most energetic impulse to industry and 
commerce, to national wealth and well-being, the worries 
that obsess the progressive business man in countries like 
England, France and the United States regarding credits 
and bank assistance cannot arise. And as for the seer, 
the man with visions, the man with the big ideas and keen 
judgment, why, in a country like Germany, he is in his 
seventh heaven. 

How would Germany have fared if she had been con- 
tent to follow the old snail-pace financial method of the 
countries older than she, commercially speaking; if, lack- 
ing capital, she had to create capital progressively to jus- 



156 AMERICA IN WORLD MARKETS 

tify the development of her industries, and if she had to 
insist on credits being established by her manufacturers 
and her merchants ahead of commercial expansion ? 

Germany knew that, if she was to take her rightful 
place quickly among the leader nations, she must mobilise 
her capital for intensive use, she must permit her banks 
to offer real inducements to depositors, she must build 
factories, create industries, develop credits, exploit the 
available markets and open new markets for herself and 
do all these things, not in orderly progression, but at the 
same time and with the utmost possible energy. To effect 
this result her banking system must be a national bank- 
ing system in the truest sense, joining in the risks, aiding 
those engaged in the other branches of the endeavor, re- 
lieving the captains of industry and of commerce of the 
burden of financial worry. Banking must not remain 
aloof but must be the handmaiden of industry, transpor- 
tation, commerce, agriculture, science. Germany's new 
way allowed her to catch up with those who had a long 
start over her. It showed her that ultimate supremacy 
was hers, if only the other nations would go on adhering 
to their old banking system. 

Such is the view of Germany's banking system held, not 
merely by Germans, but by not a few business men in 
this and other countries. 

The Englishman who knows his side of the business 
may well concede many of the German claims. And then 
he may declare, with absolute truth, that Germany's 
banking system led to the present world war. The wild 
career of financial development, the reckless multiplying 
of factories, the feverish piling up of products, the 
struggle for the markets, had caused among far-sighted 
men everywhere the gravest apprehensions for the day 



GERMANY'S BANKING SYSTEM 157 

when the process of pyramiding would bring its inevi- 
able consequences, when Germany would find herself face 
to face with the fact that the other nations would resist 
her violent invasion of their rights, that the Wirtschafts- 
Krieg which in her drunken frenzy she had told herself 
would give her victory and commercial dominion, was 
leading her to the war of blood. Her pyramid was tot- 
tering, her banking bubble was at the bursting point 
when in the summer of 1914 she decided to invoke the 
supreme gage for final and permanent success. Huge 
enterprises had been created with an insufficiency of capi- 
tal behind them. The German banks were responsible 
for the economic crime. 

The Frenchman might answer that it was from 
France that Germany learned the elasticity and enter- 
prise of modern banking, that the Credit Mobilier, estab- 
lished in the middle of the last century, was the model of 
the new bank combining many functions; that banks of 
the kind had multiplied in France and that Germany, 
after copying the model, had developed its risky features 
while neglecting the safeguards that were designed to 
counteract them. 

The American business man need not bother with 
German criticism of his country's banking institutions. 
He would not submit to the ignominy which the German 
system, in practice, involved — the loss of the individual's 
freedom, the right of the bank to spy into his most inti- 
mate affairs, the opportunity which he must put in the 
bank's hands of blackmailing him and otherwise putting 
the screws on him for political and other purposes. The 
American, however, like men in other countries, will 
realise that Germany, by putting to the concrete test 
theories that had long been the subject of much specula- 



158 AMERICA IN WORLD MARKETS 

tive discussion, has furnished an object lesson of the most 
valuable kind. 

He will wonder whether the change which Germany's 
war had forced on our banking methods — a concentration 
of the nation's financial resources effected toward one 
sole end, with a liberality of credit for all that tended to 
the prosecution of the war and a parsimony for all else 
— may not lead to new methods in our banking policy, an 
abandonment of some of the old notions of conservatism 
and aloofness, a union of interest in promoting the great 
causes of the nation, a closer contact with the people and 
sympathy with its legitimate desire for greater consider- 
ation for the cash it has to protect for the common good, 
whether as deposits or as investments. 

The great German banks came into being simultane- 
ously with the industrialisation of Germany. In 1848 the 
Schaaffhausen'scher Bankverein of Cologne was organ- 
ised; in 185 1 the Bank ftir Handel und Industrie (the 
Darmstadter Bank) ; in 1856 the Berliner Handels-Ge- 
sellschaft and the Mitteldeutsche Creditbank; in 1872 the 
Dresdner. Banks less well known to-day, private banks 
and banks of issue and a multitude of institutions of the 
Credit Mobilier type were also founded in that period, the 
third quarter of the nineteenth century. 

With the development of German industry and com- 
merce the weaker banks were systematically crowded out 
of existence by the bigger ones. Crises, crashes, panics 
benefited the big banks. The depositors turned away 
from the smaller concerns and placed their money for 
deposit — practically for investment — with the rapidly 
growing, well-advertised industrial banks. And these big 
concerns certainly knew how to advertise. They con- 
trolled newspapers and periodicals, news and advertising 



GERMANY'S BANKING SYSTEM 159 

agencies native and foreign and gained tremendous pres- 
tige at home and abroad. But they made no place in the 
sun for their smaller competitors, and the latter had al- 
most invariably to come to terms. The Deutsche Bank 
took in fifty other banks, the Dresdner Bank nearly as 
many, the Disconto more than thirty. 

Some of the absorbed banks were wiped out, others 
continued as branches, still others apparently as autono- 
mous banks, but under the direction of officials appointed 
by the big bank. The latter paid in stock for outright 
acquisition, or for control, of the smaller bank, increasing 
its own capitalisation for the purpose and then increasing 
the stock of the subsidiary, in order to swap part of it 
for stock of other small banks to be brought into the 
fold. Thus, under the prestige of highly advertised 
names, half a dozen big banks, or rather groups of banks, 
working a complex game of swapping and kiting, of in- 
flation of values, of creation of "capital," assured to them- 
selves the financial control of the industries and com- 
merce of Germany. More than that; they gained a 
powerful grip on industry and finance in foreign coun- 
tries. Sometimes the big groups united among them- 
selves in a banking cartel or in a community of in- 
terest agreement for special industrial development or 
for other reason, or in a Consortium for a particular 
transaction. 

Occasionally in recent years the big groups engaged in 
rather bitter rivalry among themselves, and bickerings 
arose when one group seemed to be stealing a march on 
the others. The Deutsche Bank was a notorious offender 
in this regard, and was accused of not playing fair. While 
operating in an Interessen-Gemeinschaft with the Dresd- 
ner Bank to get control of the Bergisch-Markische Bank 



160 AMERICA IN WORLD MARKETS 

of Elberfield, it had played a shabby trick on the Dresdner 
and had gobbled up the Bergisch-Markische Bank with 
the latter's score of subsidiaries for itself, and had thus 
won an important measure of financial domination in the 
great steel and iron and coal industries of Westphalia. 
This was several years ago, but the transaction had not 
been forgotten and as, in the years immediately before 
the war, the Deutsche Bank had carried out some other 
high-handed acts, the Dresdner planned one grand coup 
to discomfit its rival. This was no less than the acquisi- 
tion of the Schaaffhausen Bank, itself one of the big 
groups. The war came to restore harmony. 

The Deutsche had also put through some deals that 
exasperated the Disconto Gesellschaft. With the latter 
it had gone into the Roumanian oil fields; but while the 
Disconto was plodding along quietly, the Deutsche came 
out with a whirlwind campaign of oil stock promotion. 
The shares of its Roumanian petroleum companies, cap- 
italised in the millions of dollars, were offered to the con- 
fiding public of Germany by the big bank that was under- 
stood to have "the Government behind it." Wild-cat pro- 
moters of oil stocks we have known and read of in this 
country were amateurs in the business compared with the 
great German bank. The public did not have long to 
wait before the Roumanian oil bubble was punctured and 
the Deutsche Bank was left in possession of the Rouma- 
nian oil fields, costing it nothing, and with the public's 
money in its coffers. Then there occurred a diversion. 
The Petroleum Sales Monopoly — the main purpose of 
which was the confiscation of American property and 
rights in Germany and in contiguous countries — was an- 
nounced, and the Deutsche Bank was to have the leading 
part in financing the Monopoly. 



GERMANY'S BANKING SYSTEM 161 

"The bankers of Germany will not stand for war." 
How familiar that phrase was before the war began. 
When the wise and the far-sighted used to tell us that 
Germany was planning to spring a war on the whole 
civilised world, the German agents were always there to 
assure us that war could not be made without the bankers, 
and that the German bankers would not tolerate it. How 
cynical that assurance was, when the "bankers" in con- 
trol of the financial institutions of Germany were neither 
more nor less than docile appointees of the Government 
and tools of the Military Party. The old-time bankers 
of the country might not have stood for a war of this 
kind, but the old-time bankers were long out of the way, 
as far as having the chief voice in deciding the financial 
policy of the Empire. They had either been absorbed 
with their banks, or they had been reduced to a position 
of impotence. It was clearly with a view to the war 
that the German Government had not merely tolerated, 
but aided and abetted, the formation of the few powerful 
groups dominating the banking situation in the Empire 
and, incidentally, had permitted such happenings as the 
Roumanian oil stocks swindle by the Deutsche Bank, on 
the ground presumably that the common people's money 
might not otherwise be easily reached by the Government. 

The old-time bankers despised and distrusted the new- 
comers whom the Government had placed at the head of 
the powerful groups of banks, men who had no affiliation 
with the old banks of Germany, men like HelfTerich, von 
Kuhlmann, von Gwinner. All three of these owed their 
claim to Government recognition from the fact that they 
had been prominently associated with Germany's schemes 
for world domination. All three had lived in the Near 
East, associated with the construction and the direction of 



162 AMERICA IN WORLD MARKETS 

the Anatolian and the Bagdad railways. Von Kiihlmann, 
in fact, was born in Constantinople. He was of the 
chosen type of German Imperial diplomat, and as charge 
at the Embassy in London, and as Foreign Minister, he is 
understood to have been an important representative of 
the German banking system. Helfferich, the most influ- 
ential of the Deutsche Bank directors, was the preor- 
dained Finance Minister when the war came, and von 
Gwinner, who before the war publicly voiced his contempt 
of the banking system of the United States at the Ameri- 
can Chamber of Commerce in Berlin, is the Deutsche 
Bank director in control under the new "Republic." 

A still further measure of unity of control over the 
German groups of banks was obtained by special legis- 
lation shortly before the war, giving to the Reichsbank 
direct supervision over the assets of the other banks and 
special control over their specie. 

It was the new industrial movement in Germany that 
had brought the new-type banks into existence, but when 
the latter developed they turned the tables and became the 
owners or the directors of many of the industries that 
had created them. The concentration of German bank- 
ing brought the industries and commerce of the Empire 
under a centralised control. The domination finally ac- 
corded on the eve of the war to the Reichsbank, the Im- 
perial institution with the prerogative of note issue (the 
privilege of emission is still retained also by five minor 
private note banks), completed and perfected the union. 

While each of the six big groups of banks specialised 
to some extent in the class of business it controlled — 
the Deutsche in electric properties and North German 
Lloyd Steamship Company ; the Disconto in foreign rail- 
ways, steel and iron and Hamburg-American Steamship 



GERMANY'S BANKING SYSTEM 163 

Company; the Darmstadter in light railways and brew- 
eries; the Handelsgesellschaft in metallurgical works, 
and the Dresdner and Schaaffhausen in others — never- 
theless all the groups were interested to some extent in all 
the leading industrial groups. The big bank groups had 
seen to it that the chief industries were also concentrated 
into groups. Thus in the electrical business there were 
six groups of companies under the following names: 
Siemens and Halske, General Electric, Schukert Union, 
Helios, Lahmeyer and Kummer. An indication of the 
banking affiliations of these groups may be gathered from 
the fact that Siemens and Halske were backed by the 
following banks : Deutsche, Darmstadter, Berliner Han- 
delsgesellschaft, Disconto, Dresdner, Mitteldeutsche, 
Bleichroeder, Delbruck, Stern, Speyer-Ellissen. 

And similarly for the groups in the chemical industries 
and in the industries with strong cartel tendencies, such 
as mining and metal working. The German Govern- 
ment's grip on the financial, industrial and commercial 
resources of the Empire was thus complete to wield them 
at will and as one mass in its plans for the prosecution 
of war and of world domination. 

An account of the methods by which the great groups 
of German banks spread their branches abroad and 
through them used the resources of the foreign countries 
to build up German commercial power, as well as of the 
methods adopted by the German banks for keeping in 
subjection those who deal with them and for obtaining 
the foreigner's trade secrets, is worth special consider- 
ation. 



CHAPTER IX 

GERMAN BANKS ABROAD 

Economic Theory of the Foreign Bank — Characteristics 
of the German Banks Abroad — Value of State Direc- 
tion — Prestige of the German Great Banks Utilised — 
Banks Founded with the Foreigner's Money — Silent 
Partnership Arrangement with American Banking 
Houses — Experiences of American Business Men Who 
Dealt with Them — Even Blackmail Resorted to— The 
Banking Web Around the World. 

Germany's banks in foreign countries, her most potent 
weapon for dominating foreign markets, were the van- 
guard of her "economic war" forces setting out for com- 
mercial dominion of the world. Starting on her industrial 
career without the accumulated capital of countries like 
England and France, without the natural resources of the 
United States, Germany, by unusual methods, came to be 
a financial power of the very first magnitude. 

London was the financial capital of the world, and then 
New York gradually drew up. Wall Street was pitted 
against "The City." Statistics used to be quoted to show 
that Wall Street was forging ahead, and that we were 
about to have the supreme satisfaction of having the 
world's financial capital in our midst.. 

Not a word meanwhile about Berlin. Berlin craved 
no notoriety of that sort, but it was Berlin that was 
doing the chief forging ahead. Germany in all that 

164 



GERMAN BANKS ABROAD 165 

period was milking for her own purposes The City, Wall 
Street, the Paris Bourse, the accumulated capital of Italy, 
Spain, Holland and Belgium, the capital of Russia bor- 
rowed from France, the money resources of South 
America derived from the United States and other coun- 
tries. 

Germany, we have been told for the past few years, 
has been doing no foreign business; she has lost her 
foreign trade, her shipping; she has piled up war debts 
that will inevitably leave her bankrupt; she will be set 
back fifty years as a result of the war. Such has been 
the average forecast. But talk of this kind, while it may 
give some empty satisfaction, can do no good. Actually 
it is worse than useless, for it is founded on ignorance of 
the strength of Germany's financial structure, both at 
home and abroad. It would be of far greater benefit to 
the people of this country, and to the peoples of the other 
countries striving for freedom, to tell them frankly that 
there is a real danger of Germany being better off finan- 
cially in the future than most of her present adversaries, 
unless they all grasp the deadliness of the "economic 
war," the Wirtschafts-Krieg, which Germany for years, 
and in the most crafty manner, has been waging against 
them, and unless they undertake some radical counter 
measures. 

"The German bank abroad is the means of introducing 
the German element into every foreign field of enterprise. 
It is the wedge that opens the way to economic penetra- 
tion of the world's markets." This is an axiom of the 
German business universities. Another is to this effect: 
"To make a foreign nation your debtor is to put it in the 
obligation of paying to you tribute — political, financial, 
commercial. It is to make it ultimately your vassal 



166 AMERICA IN WORLD MARKETS 

state." Germany had made many nations her debtors, 
her economic vassals. Not all of them have been freed 
from their bondage. 

With thoroughness and with military precision the 
Germans went about the task of using their banks abroad 
as the opening wedge for German supremacy. The citi- 
zens of other countries have, of course, established banks 
abroad, and no one could deny to the Germans an equal 
right to do so. But it happens that there is the widest 
kind of a difference between the banks set up by the Ger- 
mans and those established by the other peoples in for- 
eign lands. In the case of the latter the banks are private 
in every sense of the word. In the case of the Germans 
the banks are practically and in effect banks of the Ger- 
man State. It is the German Government that is arriv- 
ing in your midst every time that a German bank is 
established in your country. This difference is of vital 
importance. 

The majority of the German banks abroad were 
founded by the German Grossbanken, the "great banks," 
the six big groups into which the German "credit" or 
business banks were concentrated, the groups known as 
the Deutsche Bank, Disconto Gesellschaft, Berliner Han- 
delsgesellschaft, Dresdner Bank, Schaaffhausen'scher 
Bankverein and the Darmstadter Bank. They are State 
banks, even by the admission of German official spokes- 
men, like Dr. Helfferich and Jacob Riesser, Germany's 
chief authority on banking. The latter dilates compla- 
cently on the advantages that derive to Germany from the 
fact that the great banks are directed by the State. "State 
direction," he says, "makes of the banks a united force 
for furthering the national interest at home and abroad, 
for elaborating an industrial policy, for establishing colo- 



GERMAN BANKS ABROAD 167 

nies and developing foreign trade, for creating or acquir- 
ing means of transportation and communications — rail- 
roads, shipping, canals, cables, radio stations — for con- 
trolling the press and public opinion, for upholding 
national credit, for obviating crises and preventing 
panics." 

And so, when a German bank is established abroad, it 
is the German State that is penetrating into the foreign 
country to control the press and public opinion, to fur- 
ther Germany's national and industrial policy, to estab- 
lish colonies, transportation, communications. Nowa- 
days the German banks abroad do not hoist the German 
ensign. In fact they are not always easy to recognise. 
Some ten years ago the Germans began to adopt the 
policy of disguising to some extent their banks abroad, 
dropping any appellation that would indicate their alli- 
ance with the German State, using domestic names, often 
patriotic titles. This was particularly the case in France, 
England and the United States. 

The Deutsche Bank some twenty-eight years ago or- 
ganised in the United States the German-American Trust 
Company and located here a branch of the Deutsche 
Ueberseeische Bank, the German Overseas Bank. The 
parent German bank became a weighty factor in spec- 
ulation in American railway shares, and particularly in 
those of the Northern Pacific Railroad Company, but 
in the course of time it changed its method of doing busi- 
ness, at least outwardly. The trust company's name was 
changed to the German Trust Company, and it was an- 
nounced that it would thereafter devote itself chiefly "to 
studying the condition and accounts of American cor- 
porations and to undertaking trustee operations" — a 
rather odd line of activity for a foreign bank in Amer- 



168 AMERICA IN WORLD MARKETS 

ica. The Deutsche Bank, the Disconto and the other 
great German banks now began to operate in the United 
States largely through private banks and in the name of 
the latter. 

As far back as 1872 the Deutsche Bank had entered 
into Kommandite, or "silent partnership," with a New 
York house of German origin, and this method was 
pursued on an ever-increasing scale in the past couple of 
decades by the big German groups. Disguised under the 
name of a private bank, they directed the huge German 
industrial and commercial army of invasion in the United 
States, creating for Germany commercial assets which 
the Alien Property Custodian declared were represented 
by billions of dollars. 

Any American who did business of considerable mag- 
nitude with the German banking concerns here was soon 
initiated into the German method of commercial banking. 
He had to lay open to the concern all details regarding 
his business, his clientele, his manufacturing processes, 
as well as all information concerning his particular branch 
of industry or trade throughout the United States; he 
had to admit the agents and accountants of the German 
banking concern to his factory, his place of business, his 
books; he had to agree to use the accommodation re- 
ceived solely in the way indicated to him — in other words, 
for the benefit of German industry and commerce. Then 
he received, not cash, but the banking concern's note, at 
a high rate of interest, and usually with a commission 
charge tacked on, and this note he discounted at an 
American house. Often he had to accept German counsel 
or direction in the conduct of his business, or to take 
Germans into his employ. German banking in America 
was not only an eminently profitable business as mere 



GERMAN BANKS ABROAD 169 

banking; it was also the means of enabling German in- 
dustry and commerce to grow prodigiously, practically 
on credit, and almost solely by the use of American 
money. 

The six big German banks also entered into deals and 
community-of-interest agreements for certain specific fi- 
nancial transactions or for a course of business with 
American banking firms known for generations to be 
purely American. A vast business was also done by them 
openly and directly with our national banks and trust 
companies. Many of the banks handling this business, 
as a tribute of courtesy, admitted a number of German 
clerks into their service. In this connection it has been 
remarked as noteworthy that the foreign exchange clerk, 
as well as the foreign correspondent, in almost every 
bank of importance in every large city and in every nook 
and corner of the globe was a German. The fact might 
be accepted as merely testifying to the high efficiency of 
the German as a bank clerk, were it not that investiga- 
tion has revealed that devious ways had, in many cases, 
been adopted to get the German into the post and that 
in many other cases the clerk's relations with the institu- 
tions of the Fatherland were too close to put him above 
suspicion. 

In establishing their foreign branches, as in other 
forms of operations, the six great German banks some- 
times acted as individuals and sometimes as a body. 
Mention has been made of the subsidiaries started by the 
Deutsche Bank alone, and similar foundations might be 
cited for the other banks. As a combination, the big 
banks founded the German Asiatic Bank, with branches 
in Peking, Tien-tsin, Han-kow, Tsing-tau, Hong-kong, 
Shanghai, Yokohama, Kobe, Singapore, Calcutta and 



170 AMERICA IN WORLD MARKETS 

other cities in the East, and through this bank they con- 
ducted important mining and railway enterprises. In like 
manner unitedly they founded the German East-African 
Bank and the German West-African Bank and connected 
with them, and with other banks, many telegraph, cable, 
radio, railway and mining and industrial and commer- 
cial undertakings in distant lands. 

In 1894 the six banks combined to found in Milan the 
Banca Commerciale Italiana — nothing German about the 
name, be it noted. In an astonishingly short period of 
time it became the dominant commercial bank in Italy. 
Its branches spread throughout the country; thirty-five 
of them were started within a dozen years. Trade and 
commerce in the entire Peninsula became subservient to 
them and they followed Italian business wherever it went, 
founding branches in Tunis, in Turkey and in Brazil. 
These German bankers were monopolists; no outsider, if 
they could help it, was to have any participation in Italy's 
development, and the tyranny which they exercised over 
the Italian merchants and manufacturers is probably 
without precedent or parallel in modern history. Each 
of the six great banks had its own files of records 
of merchants and manufacturers in every country in the 
world and all of them had the Schimmelpfing's mercan- 
tile agency to draw upon to supplement the records. With 
this fund of information, amplified by its own researches 
on the ground, the Banca Commerciale Italiana was soon 
in possession of every conceivable detail concerning every 
Italian doing business in any important way in any part 
of Italy. 

If a merchant carried out a banking transaction out- 
side of the German bank the fact was quickly known 
through the agents which the Germans had everywhere, 



GERMAN BANKS ABROAD 171 

and the merchant was summoned and put on the grill. 
If he was repentant and saw the error of his ways, he 
was mulcted or otherwise made to suffer a loss corre- 
sponding to what the German bank had failed to make 
on the transaction, and he was re-admitted to grace. If 
he was obdurate in his obstinacy, the Germans brought 
their final weapon to bear. They sent out private notice 
to credit and financial institutions and to the business 
concerns with which the man had dealings, that he was 
now in bad financial shape and they advised that no busi- 
ness be transacted with him, and presently the culprit 
found himself boycotted financially and commercially. 
The fact is vouched for in documents published with offi- 
cial sanction in Italy. 

Endless incidents could be cited of blackmailing meth- 
ods applied to other Italian business men to keep them 
in subjection to the German banking and commercial 
system. Thus, a merchant in the north of Italy, who had 
transgressed by ordering some machinery from an Amer- 
ican firm instead of from the agent of a competing 
German company, was sharply brought to time by the 
local German bank with which he dealt. He was in- 
formed that if he insisted on going through with the deal 
the local newspapers would be put in possession of the 
details of an escapade in which his daughter had been 
involved, and his wife would be informed of some of his 
own private delinquencies. A merchant or manufacturer 
who did not place his advertising through the German 
advertising agency in Italy — later proved to be primarily 
an agency of espionage — saw his banking accommoda- 
tion cut off and his credit impaired. With extraordinary 
rapacity the German banks went about their work of 



172 AMERICA IN WORLD MARKETS 

Germanising the financial and commercial markets of 
Italy. 

A particularly interesting point is that while the Ger- 
man banks started the Banca Commerciale Italiana with 
a capitalisation of nearly $30,000,000, they gradually di- 
minished the German stock holdings in it until their stock 
interest when this war began was less than five per cent 
of the total. Among the directors they placed Italians, 
Frenchmen and Englishmen, but despite their own small 
holdings the Germans maintained absolute rule over 
the bank. 

This has been a typical German mode of procedure. 
A large capital is "subscribed" by the powerful German 
banks to found the subsidiary abroad. Only a fraction 
of it is put up in the form of cash. The stock is turned 
over for cash, preferably of the country in which the 
bank is to operate, care being taken that the shares re- 
main in the hands of persons who are complacent, so 
that there will be no danger of interference with the 
all-German management. Puppets are put in as direc- 
tors, to save appearances, and thus the bank, seemingly 
international in character, and really capitalised with 
foreign money, is run by Germans and solely in the in- 
terests of Germany. The fund of real German money 
that had been used to make the start is taken to another 
country to repeat the operation of drawing out native 
funds to enable the German banks to get their grip on 
the industry and commerce of the country and make it 
an appanage of Germany. 

The Banca Commerciale Italiana, it should be added, 
is now a purely Italian institution and is rendering val- 
uable service in developing Italian industry and com- 
merce. 



GERMAN BANKS ABROAD 173 

The Deutsche Ueberseeische Bank which the Deutsche 
Bank founded in 1893 was designed chiefly for business 
in South America, although a branch was also estab- 
lished in New York. Twenty-three branches of this 
bank, known in Spanish as the Banco Aleman Transat- 
lantic© have been in operation in Argentina, Brazil, Uru- 
guay, Chile, Peru, Bolivia. In Spain, von Gwinner, men- 
tioned previously as one of the chief administration 
directors of the German "great banks," and known to 
American bankers from his association with speculation 
by German banks in American railroad securities, under- 
took the establishment of the German branch banks in 
Spain. He arranged first for the silent partnership of the 
Deutsche Bank with German private banks in that coun- 
try, but then cast discretion aside and organised the Span- 
ish-German Bank and later went a step further and used 
the name Banco Aleman Transatlantico, without bother- 
ing about the incongruity of the name Transatlantic ap- 
plied to a bank on the continent of Europe. 

And now, using the funds and resources of Spain, the 
Germans have been reaping for Jhe Fatherland an im- 
portant part of the profits of the enterprise and labour 
of the people of that country. 

In Belgium the silent partnership plan was worked 
by the Deutsche Bank in Brussels and by the Darmstadter 
Bank in Antwerp. The Disconto was chief owner in the 
International Bank in Brussels and in the Belgian Com- 
mercial Company in Antwerp. The Deutsche and the 
Dresdner controlled "private" banks in Paris and all the 
six German banks had their special representatives in that 
city. The Darmstadter worked Holland and likewise 
Austria and Hungary. The Dresdner and the SchaafT- 
hausen'scher took the principal part in the formation 



174 AMERICA IN WORLD MARKETS 

of the German Orient Bank, with branches in a dozen 
cities in Turkey, in Persia and in Morocco. The Dis- 
conto directed the banking invasion of Roumania and 
of Bulgaria. It also founded a string of banks in Brazil. 

To attempt to enumerate the important banks organ- 
ised by the Germans in foreign countries would be to 
string out tiresome lists of institutions and of places. 
Enough has probably been set forth to indicate that the 
German financial web, spun around the world with mar- 
vellous adroitness and infinite industry, was as complete 
as the progress of our times would permit or could de- 
mand. 

To distract the attention of the nations while this work 
was being done the Germans sedulously insisted on two 
points. One was that England and France had far more 
banks in foreign countries and that Germany was merely 
acting for elementary protection in creating new banks 
rapidly. The assertion might delude the unthinking — 
and many were the unthinking when Germany, before 
the war, was building up her great financial and com- 
mercial machine — but, of course, it does not stand up un- 
der examination. The Banca Commerciale Italiana had 
counted only as one bank, but it was greater than com- 
bined scores of petty Italian, French and British banks 
in Italy, chiefly small exchange and foreign draft in- 
stitutions. Similarly the Banco Aleman Transatlantic© 
in Spain is a great credit institution directing a com- 
merce representing a considerable fraction of that of 
the whole Spanish nation, and cannot be spoken of in 
any logical comparison with the multitude of little 
French bureaus in Spain that go by the name of banks. 
And similarly for the other countries. 

The other point on which the Germans have insisted, 



GERMAN BANKS ABROAD 175 

is that the balance of trade had for years been unfa^ 
vorable to Germany. Her imports in the years imme- 
diately preceding the war exceeded her exports by some 
hundreds of millions of dollars. Some of the German 
economists invited the sympathy of the other nations 
for Germany on this showing, but others of them, know- 
ing that every onlooker could see for himself that Ger- 
many, far from being hurt by the seemingly adverse bal- 
ance of trade, was prospering visibly and amazingly, of- 
fered some turbid explanations that shed no light on the 
subject, at least for the outsider. The fact is, of course*, 
that the balance-of-trade figures furnish no basis for 
reaching accurate conclusions in this case. We know 
to-day that tremendous quantities of raw materials and 
wares charged up against Germany in the importation 
statistics, were owned by Germany at their source in the 
foreign country. We know from revelations by the 
Alien Property Custodian and from other sources that 
great quantities of cotton, copper, leather and other ma- 
terials sent from the United States to Germany were 
owned by Germany here, although they may have been 
paid for with good American money. 

The Germans themselves cannot help gloating over the 
true facts in the case. "The foreign countries that send 
us imports in excess of our exports are working for us. 
Let them go on working for us." Thus Riesser, the 
German banking authority, quotes some of the German 
economists as saying. And this sentiment may be re- 
garded as comprehensive of the whole German theory 
of foreign commerce. "Let the foreigner work for us, 
and let him pay himself with his own money for his 
work." With tireless energy the German banks have 
exploited this theory. 



CHAPTER X 



THE SPY SYSTEM IN TRADE 



Secret Service Methods Systematically Employed — Ex- 
perience of an American Agent in Germany — The Ger- 
man in France Possessed of Private Trade Details — 
Investigation of the German Practices — The Military 
Commercial Traveller — Demand That German Ways 
Be Mended. 

It is not in our day that Germans departed from hon- 
esty in trade. With them unfair practices were among 
the traditions. Hundreds of years ago German com- 
merce was already tainted. The Hanseatic League had 
thrived on crime. Lubeck, Hamburg, Bremen and the 
other Hansa cities became rich by treacherous and vio- 
lent suppression of independent traders. Spies were sys- 
tematically employed at home and abroad to steal trade 
secrets, to work the ruin of competitors and to create 
strife in competing countries by financing and encour- 
aging contention between factions and parties. Monopo- 
lies and special tariffs were also employed as weapons. 
The League organised a great trade combine of unparal- 
leled extent. Its ramifications stretched from London 
to Novgorod. The trade morals of the whole civilised 
world of the time were depraved by the Hanseatic 
League. 

Most of the great German-owned industrial establish- 
ments in the United States were "spy centres," Mr. A. 

176 



THE SPY SYSTEM IN TRADE 177 

Mitchell Palmer, formerly Alien Property Custodian, 
stated, "filled with agents of Germany long plotting 
against the safety of the United States." He added 
that they were "part of the great German plan for the 
military and commercial domination of the world." 

The systematic way in which Germany used her Se- 
cret Service Department for trade purposes, or "eco- 
nomic penetration," long ago aroused the serious con- 
cern of the Allies. Investigations of the methods em- 
ployed and of the extent to which the system proved 
profitable to Germany have been made in several coun- 
tries, but only a small part of the information discovered 
has been made known officially. 

In the years immediately preceding the war large 
American corporations, like similar firms in Europe, 
came in frequent contact with the so-called "spy sys- 
tem in business." 

A representative of an American corporation with 
widespread foreign trade had occasion to travel much in 
Europe and had established headquarters in Germany in 
the year before the European war. He had been warned 
by friends to keep a close eye on his papers and effects 
and, as far as possible, to travel only with such baggage 
as could be taken in passenger compartments on the 
trains. This, however, was not always feasible and one 
morning when leaving Milan for Germany with a trunk 
he was struck by the eager insistence of a German-speak- 
ing employe of the foreign-owned hotel, in which for 
special reasons he had stopped, in attending to the check- 
ing of the trunk on the train. The American watched 
this employe's actions while the trunk was being la- 
belled and felt reassured until he reached Basel in Ger- 
many, where the train which had come through Switzer- 



178 AMERICA IN WORLD MARKETS 

land was to be divided in two sections and routed north 
toward Berlin, a section on each side of the Rhine. The 
customs inspection is made for Germany at German 
Basel, but the trunk in this instance was not taken off 
the train and although it was plainly visible in the open 
baggage car, the chief inspector refused to listen to re- 
monstrances, on the alleged ground that the trunk was 
routed via the eastern bank of the river while the Amer- 
ican's ticket was for the Strassburg way. This, how- 
ever, was not in accordance with the facts. To add in- 
sult to injury, as it later proved, the inspector passed 
the complainant on to a young man who said the way 
to settle the matter was to send a telegram. He col- 
lected eighty pfennigs (about twenty cents) for a tele- 
gram, dictating the wording of it and declaring that he 
would afterward fill in the name himself of the person 
to whom it should be addressed. He would give no re- 
ceipt for the money, and where the eighty pfennigs ul- 
timately found its way must remain a matter for con- 
jecture. The telegram of course did no good. 

A week later notice was received that the trunk was at 
the customs department of a central German city. An 
appointment was made for its inspection and, instead of 
customs officials, two special agents were present at the 
appointed time. The inspection was thorough. Every 
document and every scrap of paper was minutely exam- 
ined. Endless questions were asked regarding the Amer- 
ican business documents and the method of doing busi- 
ness which they implied, the countries in which business 
was done and the names of the firms concerned, the pre- 
text for the questions being the doubt that the printed 
part of the business documents might be dutiable as be- 
ing printed, and the manuscript and typewritten part of 



THE SPY SYSTEM IN TRADE 179 

them might constitute contracts and therefore be subject 
to duties under other heads. The contents of the trunk 
were weighed and separately classified and finally fees 
were levied under three separate heads for the molesta- 
tion caused by having put the German authorities to the 
necessity of making this special inspection. A total of 
about three dollars was involved. 

Soon after this incident the American became con- 
scious that his desk in an office in that same city was 
being tampered with and, after a watch had been set, a 
German in the service of the same American corpora- 
tion, and already suspected as being a Government agent, 
was caught red-handed in the act of prying open the desk 
and making a record of its contents. 

When confidences were exchanged with other repre- 
sentatives of American corporations, it was learned that 
the experience was a common one, and the comparing of 
notes seemed to show an explanation for the surprising 
ability of German firms to learn the names of the foreign 
customers of American corporations and the seeming 
coincidence of their soliciting those firms almost simul- 
taneously with the American agents, every time that the 
latter had something new to offer. Incidents can be 
vouched for where agents for American corporations in 
Italy and other countries on receiving from America new 
machines or radically new models found to their amaze- 
ment that German agents had already visited their cus- 
tomers, had described the new machines or models and 
had denounced their alleged weak points and their un- 
desirability for various reasons. The German agents ac- 
tually knew more about the new American offerings in 
machines than the American agents. 

In France, a year before the war, an American agent 



180 AMERICA IN WORLD MARKETS 

had occasion to seek bids on the printing and binding of 
illustrated machine catalogues. Unsolicited, a German 
appeared, in possession of all the details regarding the 
projected work, and presented prices on behalf of a large 
printing and publishing company of northern Germany. 
His samples of work, while inferior artistically- to the 
French offerings, were excellent from many points of 
view and his figures on the job were less than half those 
submitted by two of the French bidders, and much 
cheaper than the cheapest French bid for an inferior 
grade of work. In the matter of binding the German 
was far ahead. Furthermore he was full of information 
regarding the French firms who could handle work of 
this kind and cited many details derogatory to them. 

Apparently secure up to this point that he could carry 
off the order, the German spontaneously raised the ques- 
tion regarding the obligation imposed by the French law 
of having the name of the printer and the country of 
origin appear on the printed matter. He took it for 
granted that no company doing business with French 
manufacturers would wish to have a German inscription 
of origin appear on their French catalogues and he was 
ready with several solutions of the problem involved; 
also seemingly taking it for granted that an American 
firm would be willing to violate or circumvent the rigid 
prescriptions of the French law. 

Three plans to beat the French law were proposed. 
First, the German company would undertake to deliver 
the catalogues in France without any indication being 
printed on them regarding their foreign origin. How 
they were to pass the French customs officials at the bor- 
der was not explained; all questions as to whether they 
would be smuggled in or passed by the bribing of French 



THE SPY SYSTEM IN TRADE 181 

officials being met with the answer "That's our business." 
Second, the German company would ship the catalogue 
material, both letterpress and binding, in small irregu- 
lar quantities through several border points, marked as 
samples. Third, the German company would print its 
name and address on a perforated sheet and, after the 
books had entered France, this sheet could be torn out 
by the American company's agents who delivered the 
catalogues personally to the French customers. The cata- 
logues retained in the offices of the American company 
in France would still have the German inscription on 
them in fulfilment of the French law and if any un- 
marked catalogues were discovered by French agents, it 
would be easy to explain that it must have been the 
French customers who had destroyed the German mark- 
ings. When upbraided on the matter, the German, who 
had shown alarm when requested to put his proposals in 
writing, promptly declared that in reality he was not the 
agent of the German firm but only a friend of the agent, 
that the suggestions he had made were presented merely 
on his own initiative and that the German company could 
not be held responsible for them, and he beat a hasty re- 
treat. Whatever was his position, he was surprisingly 
well informed. Many such instances of German "pene- 
tration" could be cited. 

A French writer, M. Lucien Descaves, who has made 
special investigations in this matter, quotes from a secret 
document, of which he has seen a copy, containing in- 
structions to German engineers, who are called on to sink 
their professional pride and to devote themselves to find- 
ing trade secrets and furthering German 4 trade, which 
will be readily possible for them through the prestige of 
their professional status. 



18* AMERICA IN WORLD MARKETS 

An Italian publicist has stated that "the Italian author- 
ities have proofs regarding the manner in which the Ger- 
man Government works hand in hand with the German 
system of corporations, organised almost like the me- 
diaeval guilds, regarding the way in which the plans of 
campaign are worked out, and the way also in which 
German diplomacy in all its ramifications is put at the 
service of the trade campaign." The famous Italian 
financier and former Premier, Senator Luigi Luzzatti, 
urges the Allies to unite "not for any Utopian scheme 
of trade protection, but in common defence against the 
secret intrigues of the German Government and its secret 
agents to the detriment of the trade of the Allies." 

M. Emile Boutroux, of the French Academy, has said : 
"It is not the amount of visible force which will remain 
to Germany after the war which will represent the mea- 
sure of the danger which she will mean for humanity; 
it is the persistence of her determination to dominate, 
to grow great, to oppress others. Latent, hidden, in- 
visible, its very existence denied, that determination, if 
we judge the future by the past, will continue to exist. 
The German notion of sincerity and frankness consists 
in employing deliberately the means best adapted to de- 
ceive others for the profit of Germany." 

M. Descaves has described the results of a tour he 
made of neutral countries for the purpose of investigat- 
ing German Secret Service in trade. Both men and 
women, he says, are employed in this way by Germany, 
mostly young men and women. Secret Service and busi- 
ness promotion are practically convertible terms. The 
German Secret Service man or woman is taught the art 
of trade development and the German commercial trav- 
eller is taught the art of espionage. Germany realises 



THE SPY SYSTEM IN TRADE 183 

that the role of commercial traveller is the best disguise 
for a Secret Service agent and that Secret Service is 
the best of all adjuncts to trade. Germany, according 
to M. Descaves, is inundating the neutral countries with 
literature and with agents. The agents are recognised 
as by far the more productive. Printed documents are 
scattered broadcast, but unless they are followed by many 
others, tEey are soon forgotten. Where the agents 
follow one another, working with mutual aid, their work 
is practical and profitable. They perform not merely a 
common task ; they work out a propaganda. 

During the war, this writer stated, the Germans sys- 
tematically granted furloughs from the army to their 
mobilised men who had been commercial travellers in for- 
eign countries. These men were authorised to visit their 
former customers and were urged to work with zeal and 
adroitness and to produce practical results. Special re- 
wards were reserved for those able to practice espionage 
for the benefit of Germany. The agent had a double, 
or rather a triple, part to play. He was openly placing 
his country's products, he was advertising his country's 
greatness and secretly he was gaining information re- 
garding Germany's neighbors and her enemies. These 
German commercial agents for the most part were young, 
industrious, insinuating, tenacious. The promises they 
made in the name of the great commercial firms of Ger- 
many were kept. They were serviceable and they pushed 
their eagerness to be agreeable to the point of servility. 
While they did not succeed in making themselves popular 
they imposed themselves on the business men because 
they could quickly obtain from Germany what merchants 
had patiently but vainly sought elsewhere. 



CHAPTER XI 



INFLUENCING THE PRESS 



Court Martial Exposes German Ways of Press Corrup- 
tion — German Female Spy Marries Pre-Selected Ital- 
ian Sailor — She Handled Newspapers — Publicity Or- 
ganisation of German Corporations — Denounced as 
"Corruption Agency" — Socialist Internationale Used 
as Intermediary. 

The foreign press was the object of intensive efforts 
on the part of the Germans. To facilitate espionage, to 
spread "defeatist" and bolshevist doctrines, to discour- 
age foreign business seeking trade outlets, to arouse sus- 
picion and enmity among the great nations, a systematic 
campaign of corruption was put in motion by Germany's 
leaders. Direct subsidies and indirect subventions in the 
guise of payment for advertising were among the means 
employed. So difficult was it to cope with this evil that 
both France and Italy were obliged, in the fourth year 
of the war, to decree that no newspapers or other pub- 
lications carrying advertising of any kind should be sent 
abroad from those countries. The French and Italian 
newspapers and periodicals went to foreign countries 
with all their advertising space blank. 

The trial in Genoa, in the Spring of 191 8, of the heads 
of the Officine Elettriche Genovesi revealed the amazing 
boldness of the Berlin spy system in its operations in a 
country at war with Germany and the endless entangle- 

184 



INFLUENCING THE PRESS 185 

ments which were erected around the organisation to ren- 
der it immune from legal attack. It also testified to the 
long-suffering tolerance of the Italian Government. The 
O. E. G., as the concern was popularly known, a sub- 
sidiary of the German General Electric Company of Ber- 
lin, had obtained control of the public services and even 
the harbor transportation of the port of Genoa. Herr 
Koenigsheim, the supreme director of the company, was 
called the "German Governor of Genoa.' ' The phrase 
was used at the trial by the Italian commander of the 
Arsenal and Artillery Factory of Genoa, who gave evi- 
dence regarding the espionage system conducted by Koe- 
nigsheim, to whom all the German spies in northern Italy 
reported as to their supreme chief. Koenigsheim fled 
from Italy when his machinations became known and 
was sent by his government to Bucharest as head of the 
German spy system in Roumania. 

Among the charges made at the trial against this man 
and his subordinates were sabotage of Italian war plants 
— destruction of property in the Government artillery 
and munitions factories, in the naval radio stations, on 
shipboard and elsewhere — communication with the enemy 
to the detriment of Italy, and high treason. It was as 
an incident that espionage and intention to misuse the 
press were brought into the trial. 

One of Koenigsheim's agents was a young woman who 
had been sent from Berlin with the recommendation from 
the chief of the espionage bureau that she was "a very 
capable and penetrating agent." She had been in Italy 
only a few weeks when she married a petty officer in the 
Italian navy. An officer of the Italian Carabinieri, or 
gendarmes, testified that he had proof that it was Koe- 
nigsheim who arranged the marriage and who picked out 



186 AMERICA IN WORLD MARKETS 

the young man, whose work gave him access to impor- 
tant military positions. 

This young woman communicated directly with the 
espionage chief in Berlin. Her correspondence showed 
that she pulled the strings all over Italy where German 
spies were working and it required great patience and 
ingenuity on the part of the Italian Secret Service to 
follow the lines that led from her office and to circumvent 
her activities. Her work had been so pernicious that the 
public prosecutor demanded a penalty of twenty years in 
jail in her case. It was she who handled the newspaper 
lists. Minute details were forwarded by her to Berlin 
regarding Italian newspapers, copies of which she also 
forwarded, and to her were delivered copies of French, 
English and Spanish newspapers, which she likewise 
transmitted to her chief. The precise nature of her 
dealings in this regard was not made public, but it was 
significant that immediately after the matter was to some 
extent vented before the court martial the decree was 
published suppressing all advertising in newspapers going 
abroad and forbidding any one but a specially appointed 
postal agent from mailing newspapers destined for for- 
eign countries. 

Zurich, Switzerland, was the way-station for the com- 
munications between Genoa and Berlin, and it was due 
to the fact that the stock control of the Genoese com- 
pany was held in the so-called "Elektro Bank" of Zurich' 
that the Italian Government had hesitated so long about 
laying hands on the concern in Genoa. It was necessary 
to establish beyond question that the bank was owned 
by the General Electric Company of Germany and by 
the Deutsche Bank before action could prudently be 
lakes. 



INFLUENCING THE PRESS 187 

One of the German organisations created during the 
war for the purpose of endeavoring to influence the 
press of the world was the "Ala," whose mission was to 
manipulate newspapers in Germany and in other coun- 
tries, through funds ostensibly paid out for advertising. 
Another was the "Archiv," which operated in conjunc- 
tion with the "Ala," and handled the work of espionage 
developed through the agency. 

Both the "Ala" and the "Archiv" were under the di- 
rection of Dr. Hugenberg, one of the most influential 
of the Krupp directors. 

The name "Ala" is a contraction from Allgemeine 
Anzeigegesellschaft (General Advertising Company) 
which had as its avowed purpose the placing of adver- 
tising in home and foreign newspapers and periodicals 
in behalf of the great German industries. The "Archiv" 
existed ostensibly for the purpose of gathering and co- 
ordinating information of practical economic benefit to 
Germany in co-operation with the "Ala." 

All the members of the great union of German manu- 
facturers and merchants, effected for the conduct of the 
war and for the preparation for the transition from the 
war footing to the peace footing, were represented on 
the board of the two organisations and contributed pro 
rata to the expenses of their operation, in payment nom- 
inally for the advertising of the individual industries. 
Theodore Wolff of the Berliner Tageblatt denounced 
these organisations and declared that the "Archiv" was 
in reality "a detective bureau" and the "Ala" a "true and 
actual agency of corruption and subornation." 

In a public trial in Italy the editor of the most widely 
circulated Socialist newspaper of northern Italy, an 
avowed anti-war and anti-monarchical organ, admitted 



188 AMERICA IN WORLD MARKETS 

that he had received about $10,000 from the "Interna- 
tionale" organisation in Switzerland. The Italian Gov- 
ernment agents who were in contact with that organi- 
sation had proof that it was financed from Berlin and 
that it was sending funds to newspapers in other coun- 
tries besides Italy. 

For many years before the war a German newspaper 
advertising agency, which operated under a partnership 
name, exerted a powerful influence in many European 
countries and its activities extended to all parts of the 
world. In Italy, for instance, it controlled by far the 
greater part of the general press advertising of the king- 
dom and only the prosperous newspapers could consider 
themselves immune from its influence. It handled the 
advertising not merely of the firms immediately under 
German control, but also of many others which invol- 
untarily were brought under its sway. An Italian manu- 
facturer who employed this agency found that the local 
commercial bank, owned or managed by Germans, was 
liberal in its treatment of him. The manufacturer who 
tried to turn a deaf ear to this agency was rudely brought 
to his senses by the bank, if he was under obligations 
to the latter. The agency's power over a considerable 
section of the press can readily be understood, but the 
tyrannical way in which that power was used can only 
be appreciated by those who have intimate knowledge 
of German financial methods. 

For some time after the war began this concern con- 
tinued openly its operations in Italy under the fiction that 
it was Swiss, and not German, but the mask ultimately 
was torn from it and its activities were interfered with, 
at least as far as the then existing organisation was 
concerned. Very soon, however, certain new adver- 



INFLUENCING THE PRESS 189 

tising agencies came into being in France, Italy and 
other countries, but in time it was discovered that their 
funds were being received from Switzerland and their 
enemy alien character was revealed as a result of inves- 
tigation in the latter country. The Italian government 
has ascribed to the German literary propaganda the great 
Austro-German victory at Caporetto in October, 19 17, 
and the succeeding invasion of Italy which was well 
nigh fatal to that country. 



CHAPTER XII 

TO PROTECT AMERICAN PRODUCTS 

The Distinctives of Merchandise — Germans 'Systemat- 
ically Appropriated Those of Other Peoples — "Vi- 
enna" Hand Bags Made in Germany — No Business 
Too Trivial for Imitation — Incident of the "American 
Saints" in Mexico — United States Products Particu- 
larly Exposed to Appropriation. 

In the world's markets the retail purchaser, seeking 
baggage, makes his choice between an English bag and 
a French bag, and knows that the characteristics of each 
are distinctive. There is a difference between the Eng- 
lish bag and the French valise, as there is between an 
English suit of clothes and a French suit; the former 
aiming to drape the male figure with a certain elegant 
fulness and prodigality of material, and the latter fur- 
nishing neatness and exactitude in fitting, and there is 
a no less marked difference between an English watch 
and a French watch, between an English picture and a 
French picture, between an English glove or shoe and 
a French glove or shoe. The difference is a tremen- 
dously valuable commercial asset. 

The foreigner when rilling his needs is not merely 
moved to make his choice dependent on well-known 
characteristics in the merchandise, but he is inclined to 
duplicate his requirements. His inability to decide on 
a superiority of attraction between an English clock 

190 



TO PROTECT AMERICAN PRODUCTS 191 

and a French clock will often induce him to purchase 
both. What may be called the distinctives of trade give 
to the products of England and of France an assured 
position in all markets. 

Even in Germany before the war the most exclusive 
and most expensive men's furnishing stores in all the 
leading cities flaunted the sign "The Jockey Club" 
or some other English device, and dealt only in English 
wares, and the most elegant shoe stores sold women's 
footwear made by Pinet of Paris and men's shoes from 
a factory at Romans in the southeast of France. And 
meantime German manufacturers were industriously 
spreading throughout the world's markets close imita- 
tions of English garments and furnishings for men and 
of French footwear for men and women. 

In some lines the imitations sent out by Germany 
bore their own condemnation for every experienced eye, 
in their characteristics which revealed them as imita- 
tions. But this was not the case universally. 

Austria had won world honor for products of various 
kinds. Royal Vienna porcelain acquired prestige and 
was in demand in foreign lands. The Germans imitated 
it and flooded the world with gaudy plates which, instead 
of being adorned with artistic hand-paintings, contained 
paper pictures pasted on the plates, and to make the 
fraud pass, had a mark almost identical with the Royal 
Vienna symbol painted on the bottom of the plates. 

Women's hand bags and pocketbooks made in Austria 
were also highly esteemed in all the principal countries. 
Damentaschen made in Vienna were in demand and com- 
manded high prices. In this case also German manu- 
facturers went into the imitation business, but from the 
early cheap imitations they progressed to the production 



192 AMERICA IN WORLD MARKETS 

of a high-grade article. Expert bag makers were brought 
from Vienna and a close duplicate of the Austrian spe- 
cialty was turned out. 

So far there was nothing notably unethical in the pro- 
ceeding. But the German manufacturer had no idea 
merely of entering into open competition with Austria 
in Damentaschen. He determined to put his goods on 
the world's markets fraudulently as Vienna products. 
One of the leading manufacturers of ladies' bags of 
Offenbach, near Frankfort-on-Main, the centre of the 
industry in Germany, declared to the present writer that 
90 per cent of the "Vienna" bags and pocketbooks sold 
in the United States were made in Germany; that they 
were sent first to Vienna to be stamped there with the 
Vienna mark and that thus they paid import duty twice, 
once to Austria and again to the United States. These 
German manufacturers were simply engaged in the prac- 
tice of stealing an important trade asset of Austria. 

The systematic imitation of the merchandise and 
marking of merchandise of other nations is carried out 
by the Germans even in the most unexpected places and 
with a thoroughness which at times seems ludicrous, but 
which our present knowledge of German plans shows 
to be all too serious. In Mexico an astonishingly large 
proportion of business is done throughout the country 
by Arab peddlers. These "Arabs" are for the most part 
Syrians, adherents to Christianity, but as they wear the 
sombrero and the garb of the Mexican they pass off com- 
monly for natives. They replace the mail-order business 
in Mexico and they sell on time and on instalment when 
they cannot get cash. With quite remarkable enterprise 
they are ready to take an order for a sewing machine, 
for an agricultural machine, a piano, or an automobile 



TO PROTECT AMERICAN PRODUCTS 193 

from a Hacendado and to collect from him in instalments 
over a lengthy period, and at the same time they supply 
the Pelado, the poorest of the country's poor, with his 
rudimentary needs in the way of wearing apparel, cot- 
ton trousers, sandals and bandana head covering. But 
the chief part of their trade is in furnishing the peon 
class with cheap finery and ornaments. The majority 
of these Arabs are tributary to the City of Mexico, and 
the street immediately to the south of the National Pal- 
ace in that city is occupied almost entirely by the Arab 
wholesale merchants, who supply the merchandise, at- 
tend to the filling of orders and arrange the financing of 
the travelling peddlers. 

An American who had studied the market broached 
this trade one day with a quantity of a new kind of jew- 
elry, the chief feature of which was a gilt and enamel 
brooch, with a celluloid-covered photograph supposed to 
depict the figure of some of the popular saints, but in 
reality reproducing the features of American actresses. 
The materials were produced in bulk in Providence and 
New York and put together in Mexico and the finished 
product was sold very cheap. The peons fought for the 
American Saints (Santos Americanos) or Santitos 
(Little Saints) as they became commonly known, and 
the dealers could not get enough of them. The Ameri- 
can patented the brooch and prepared to enter the junk 
jewelry trade in a considerable way. 

But, after little more than a month had elapsed, a Ger- 
man agent presented to the Arab merchants an imitation 
of the Santitos, a poor thing in comparison with the 
American's, a single piece brooch with the Saint printed 
on the metal. He asked about one-half the American's 
price and offered four months' time, as against spot cash. 



194 AMERICA IN WORLD MARKETS 

The American Saints thereafter sold in Mexico were 
made in Germany, and the American felt that it would 
be a waste of his time and money to fight for his rights. 
The first impression of one acquainted with the incident 
was surprise that German manufacturers should bother 
with such a petty and precarious business, but later ex- 
perience showed that no business was too trivial for Ger- 
man organised commerce to touch and that like proce- 
dure has been going on in the Central and South Ameri- 
can republics and even in more remote quarters of the 
globe. To the German scientifically schooled for trade, 
every chance that offers for "economic penetration" must 
be grasped and it should be remembered that the German 
graduate of commerce is usually at the same time a grad- 
uated purveyor of military and other intelligence for the 
Fatherland. 

American goods are particularly exposed to German 
fraudulent imitation because generally they lack the dis- 
tinctives of their national origin. There are, of course, 
American pianos, agricultural machines, watches, bridges, 
which have these distinctives and accordingly have won 
for themselves special recognition in foreign markets; 
but they are the exception. American manufacturers gen- 
erally, regarding the foreign market as only a minor one, 
had not aimed to nationalise their trade, to make known 
its distinctive features so as to prevent the Germans 
from appropriating them, or to produce articles so pecu- 
liarly American that they would be known as such on 
sight, just as English and French wares have recognis- 
able qualities associated with the countries from which 
they originate. Until they set themselves to the task of 
turning out products that meet the foreigner's views and 
are yet distinctively American, and of handling their 



TO PROTECT AMERICAN PRODUCTS 195 

trade in a way that is specifically national, they will not 
have begun to fulfil this aim. 

Thus, for example, if the Latin- American likes his 
shirt with voluminous tails and with the neckband cut 
low in the front, there is no reason why a shirt con- 
forming with these requirements should not merely be 
made in America, but be distinctively and conspicuously 
an American shirt. The distinctive characteristics do not 
necessarily mean the special form of the article as used 
at home. 

To create the American distinctives of trade it will be 
necessary for American merchants to make a united 
effort. It is not too much to say that it may be regarded 
by them as a patriotic duty to further this nationalisation 
of American trade. Concerted work on the part of man- 
ufacturers will be needed to effect promptly for Ameri- 
can goods what the amour pro pre of the Frenchman and 
the fine national spirit of the Englishman have done for 
theirs. All who have handled American machinery in 
foreign countries know how difficult it is to get around 
the psychological spell cast by the words "Made in Eng- 
land" or "Made in France" inscribed on a machine. In 
manufacturing machinery America leads the world, is 
facile princeps, but in the years since this superiority 
was assumed but little has been done to impress it on the 
foreigner. Germany has had too much to do with hand- 
ling American manufactures. Her ships have carried 
them, her agents have made money and have promoted 
German trade by selling them and have had a free hand 
in making of them a trade asset for their own country. 



CHAPTER XIII 

BRIBERY IN TRADE PROMOTION 

Mystery of American Trade Misfortunes Abroad — Sa- 
botage a Typically German Weapon — Italian Premier 
Denounces Bribery — When Krupps Were Exposed — 
An Apology for Commercial Immorality — How Shim- 
melpfeng Credit Agency Obtained Its Famous Lists — 
German Professors as Corrupters in Italy. 

Leading American corporations in the past spent large 
sums in the effort to fathom the mystery of their mis- 
haps and misfortunes in distant countries. When Amer- 
ican merchandise was found damaged on the piers of 
South American ports, it was reported back that the 
shippers in this country did not know how to pack their 
wares. 

This, however, did not satisfactorily explain why it 
frequently happened that when an agent from this coun- 
try had succeeded in booking an order of any importance 
in South America, a German agent was at once aware 
of the fact, was after the South American merchant with 
an offer to deliver equivalent goods at a much lower 
figure and at the entire risk of the German firm if the 
South American did not desire to accept the goods when 
presented, and that it was the latter goods — often ma- 
chinery or manufactures that had been produced in the 
United States, were thence shipped to Hamburg or Bre- 
men and reshipped to the South American port— which 

196 



BRIBERY IN TRADE PROMOTION 197 

were actually delivered to and accepted by the South 
American merchant while the American goods to fill the 
order lay wrecked in gaping packing cases on the local 
wharves. 

To-day we know that German agents had systemat- 
ically bribed customs officials and dock employes at South 
American ports; we know that sabotage was quite regu- 
larly committed on United States merchandise, and we 
have reason to suspect that German bribery penetrated 
deep into the business establishments of South American 
firms. 

Sabotage, the damaging of work, machinery, or tools, 
was generally regarded as a practice originating with 
French anarchist workers. To-day this atrociously 
vicious form of destructiveness is recognised as German 
in its origin and propagation. 

We know now that the thefts and damage inflicted 
on American goods sent to Italy, causing serious loss 
to American merchants and discouraging them from 
pushing actively into the Italian market, were the conse- 
quence largely of German bribery. The now notorious 
O. E. G. (Officine Elettriche Genovesi — Genoese Electric 
Plants), a subsidiary of the German General Electricity 
Company, was revealed, at a court martial last year in 
Italy, to have been in practical control of the harbor 
transportation of Genoa, and its four German directors 
were convicted of consistently procuring sabotage and 
were, for this and other crimes, sentenced, in their ab- 
sence, to death. 

At home we have had incidents of clerks in business 
firms being bribed in the interests of Germany to reveal 
the current transactions, copies of cablegrams, and the 
like ; of attempts to bribe customs officials ; of bribery and 



198 AMERICA IN WORLD MARKETS 

sabotage at transportation points; of bribery of factory- 
hands, and so on. Enough is known and has been made 
public regarding the German backing of the I. W. W. 
and of the German plans to bribe organs of publicity, 
politicians and members of the bench, to show the extent 
and the methodical organisation of German bribery in 
this country. Whole industries have been in some de- 
gree affected by it and it was extended even to American 
agriculture. 

Proofs abound that the Imperial German Government, 
through its accredited agents and through the great man- 
ufacturing and mercantile establishments in which the 
Government was a co-partner, not merely authorised, but 
inculcated bribery as a means of economic penetration. 

In June, 191 5, Antonio Salandra, then Italian Pre- 
mier, stigmatised the wholesale campaign of bribery 
which the German Government had for years been con- 
ducting in Italy. As arch-briber he named Prince 
Bernhard von Biilow, who twenty years ago was German 
ambassador to Italy, later was Imperial Chancellor and 
then was special ambassador to Italy in the interval be- 
tween the beginning of the European war and the entry 
of Italy into it. 

Prince von Biilow, the Premier stated, had bribed poli- 
ticians, merchants, newspapers. "Germany," he said, 
"believed that money could paralyse Italy and put her 
politically, commercially and morally at the mercy of 
Germany, and German diplomats spent millions of marks 
to put Germany in control of Italy's national policies as 
well as of her industry and commerce." 

'Bribes were distributed in revolutionary circles to un- 
dermine the Italian King's authority and the strikes at 
Prato and the disastrous riots at Empoli were started 



BRIBERY IN TRADE PROMOTION 199 

with German money, as was proved by the confession 
of the organisers and ringleaders. No use in making de- 
nials, when the Italian Premier was ready to answer the 
denials by showing to the world the proofs of his as- 
sertions. 

Half a dozen years ago, seemingly as a result of bit- 
ter disputes among politicial parties in Germany, the 
Krupp firm came into the Berlin courts for bribing Gov- 
ernment officials to start a war scare, so as to get orders 
from the Reichstag for more Krupp guns. The case was 
hushed up as far as possible and probably it would never 
have reached public notice, were it not that certain Paris 
newspapers were denouncing Krupp agents for trying 
to bribe French newspapers for a similar purpose, with 
the design, as it seemed at the time, to promote business 
for the ordnance manufacturers. The guilt of the Krupp 
agents was not denied, although the association of the 
German Government with the concern was known to be 
of the most intimate kind. 

The Japanese Government, a year or so later, aired be- 
fore the Tribunals of Tokio the bribery activities of the 
agent of the Siemens-Schuckert Company of Berlin, a 
concern whose subsidiaries and affiliated companies en- 
circle the globe. This agent had bribed all kinds of func- 
tionaries of low degree, including janitors and office 
cleaners of Government departments, and, for bribery 
and theft of important documents, was sentenced to two 
years in jail. 

As there was no way of denying the existence of brib- 
ery as a German policy of expansion, the German mili- 
tarists have scornfully rejected the old theories on com- 
mercial morality and have expounded a thesis on the new 
ethics. Briefly it is this : Warfare is a justifiable means 



200 AMERICA IN WORLD MARKETS 

of enforcing the policy of the State. Industry and com- 
merce are instruments of modern warfare. It is no more 
immoral to employ bribery in commercial warfare than 
it is to poison wells, to kill women and children in open 
towns, or to sink non-combatant ships without trace. 
All these things, far from being immoral, are highly 
laudable if their purpose is to hasten Germany to her 
goal of world domination. 

The Italian economist, Giovanni Preziosi, declares that 
the German doctrine, as taught in the higher institutions 
of commercial science, is that "every exploitation of 
others, every encroachment made in foreign countries, 
by whatsoever method it is accomplished, is a respect- 
able equivalent of military conquest/' This is the Ger- 
man doctrine of the present generation. It may be said, 
while still dealing with the apologetics of German brib- 
ery, that Germany seems to have started off on her great 
career of industrial and commercial expansion without 
any thought of adopting bribery as an essential part of 
her economic policy. It was when the first great crash 
from over-expansion came with bitter experiences in 
Japan and other countries in bad times, that Germany 
as a nation was seen to resort to the most ignoble form 
of commercial dishonesty. 

Germany had rushed headlong into the world's mar- 
kets without the safeguards that England, France and 
other countries had built up for themselves in genera- 
tions of trading. One thing that was lacking to Germany 
was a line of credit information. It was then that the 
Schimmelpfeng Information Company came to the fore. 
It engaged to do in a short time what the other coun- 
tries had accomplished only in centuries. As there was 
no way of acquiring in a few brief years the commercial 



BRIBERY IN TRADE PROMOTION 201 

knowledge which is gathered as the result of long ex- 
perience, the information company undertook to rifle the 
credit storehouses of England, France, Holland, Belgium 
and other countries and to gain one of the most precious 
of the national assets of those countries — by bribery. 
And Schimmelpfeng became the world's greatest credit 
bureau. Germans boasted of it as one of the monu- 
ments of their commercial greatness. 

Who has not heard the stories of the American tour- 
ist in Berlin putting Schimmelpfeng's to the test, and 
asking a poser about the general store in the little home 
town in a remote region of the United States, and the 
Schimmelpfeng people promptly digging out the indexed 
card, with every last detail of information, including the 
two wells in the garden, one of which was unknown to 
the tourist? These stories may be more or less apocry- 
phal, but there is abundant evidence that Schimmel- 
pfeng's is a depository of an enormous mass of commer- 
cial information on every country in the world, and that 
the information gathered by its agents was no less mili- 
tary than commercial. 

The German Government was of course aware of the 
methods adopted in gathering the information, since 
its own agents co-operated in the work, and the promi- 
nent merchants and manufacturers of Germany were 
certainly not ignorant of the methods. Bribery was a 
time-honored practice in the gathering of military in- 
formation, but the Governments whose agents practised 
it were not supposed to know to what devices their 
agents abroad were having recourse. In Schimmelpfeng's 
operations it was for the first time recognised nationally, 
almost officially, as a tolerable, if not a commendable 
practice in behalf of the State's commercial development. 



202 AMERICA IN WORLD MARKETS 

It was not long until all the factors in Germany's ma- 
terial growth — banking, diplomacy, industry, trading, 
transportation, science — were found resorting, each in 
its own way, to special forms of more or less open brib- 
ery. Every German banker, diplomat, manufacturer, 
merchant, scholar, artist, having a mission from his 
Government, or working for, or in co-operation with, 
the great banking, industrial, commercial and educational 
institutions of Germany, besides his normal avocation, 
has had a subsidiary commission as a good German sub- 
ject. It is not a commission as spy — this would be in- 
dignantly denied, for a spy has, as prime duty, the hunt- 
ing up of military plans and naval secrets. The nature 
of the special patriotic activities is indicated in German 
documents on the subject published in Italy. The Ger- 
man abroad, invested with the role above indicated — for 
of course not every individual German falls into the 
category, or is given the explicit or implied commission 
— is instructed "never to overlook the opportunity to in- 
vestigate regarding economic resources, political tenden- 
cies, military forces, etc. ; also to make notes on monetary 
reserves, on agricultural production, on the concentration 
of cattle, etc., in the foreign country, and to forward 
notes and documents directly through German official 
agents, or indirectly through German banks and indus- 
trial establishments, or failing these, to seek out Ger- 
man students, ascribed, with scholarships, to the foreign 
country, as these are in direct relation with the Govern- 
ment." 

Immoral practices in business are not new nor are they 
peculiar to any country, but when they are justified, when 
they are erected into a national policy and are made an 
element in commercial "warfare," it is time that the 



BRIBERY IN TRADE PROMOTION 203 

free peoples take action to prevent the whole trend of 
trade and commerce being permanently degraded. 

Italy, which has been a field for the most shameless 
exploitation by Germany, is more affected by revela- 
tions regarding corruption in the domain of learning than 
in any other reach of human activity. What Italians call 
la germanizzazione colturale, "the cultural Germanisa- 
tion," of Italy has hurt the feelings of a whole nation 
since the facts have been laid bare. 

Italy's schools, her science and her culture have been 
the objects of German bribery. The aim was to impose 
upon Italy a German concept of the world, and for this 
purpose the mechanical aspect of knowledge, rather than 
its relations with the spiritual and intellectual life was 
taught from German textbooks. Germans re-wrote the 
history of Rome. They gave to the German tribes an 
exaggerated place among the rulers, the legislators, the 
reformers, the rebuilders, and claimed for the Germans 
the development of the Communes and the glory of the 
Renaissance. They put all the men of history to the 
German test — color of eyes and hair, size of body, facial 
angle. Herr Professor Woltmann proved in this way 
that Michelangelo Buonarotti and Leonardo da Vinci, 
the glories of Italian art and science, were good Ger- 
mans whose correct names were Bonroth and Winke. 

Italian officials affirm that the Germans had organised 
an "Artistic-Economic General Staff" for world con- 
quest. The chief of staff was Wilhelm Bode, head of the 
Royal Museum of Berlin. Bode's run-in with famous art 
critics of Europe a few years ago, in connection with the 
modern wax bust he had purchased and which he in- 
sisted in ascribing to Leonardo, threw a glow of light on 
the artistic and ethical principles of that particular 



304 AMERICA IN WORLD MARKETS 

scholar. Under the direction of Bode there operated in 
Italy many German professors, including Rolfs, Eckhart 
and Frey. Rolfs, it has been publicly announced, bribed 
a museum watchman in central Italy, purloined a manu- 
script which an Italian artist had in preparation regard- 
ing the interpretation of certain drawings, and published 
it as his own. It reached a point where the Italian au- 
thorities had to put the German professors on their word 
of honor not to pilfer, or publish without permission, 
before allowing them to inspect Italian art treasures. 
Thus Professor Frey, lecturer in Berlin on the history 
of art, formally pledged his word of honor before be- 
ing entrusted with the Michelangelo charts in the Lau- 
rentian museum in Florence; but he broke his word and 
published the charts. The same professor is charged 
with having paid a bribe of 30,000 marks to get posses- 
sion of the Vasari correspondence. 

While the German professors were an object of de- 
rision to the great body of the Italian public, it must 
be admitted that they cast a strange glamour over a mul- 
titude of Italy's scientific men. A sort of oriental wor- 
ship was created around them and they were the central 
stars of a galaxy of Italian planets and satellites. Money 
was spent lavishly. Gatherings of Italian "scientists" 
were taken on junketing trips through Germany and 
large numbers of Italian students received German 
scholarships and went to Germany to study. 

Germany established scientific and artistic institutions 
in Italy, such as the Istituto Germanico of Rome and the 
Istituto Germanico d'Arte of Florence. These institu- 
tions were centres for the diffusion of German propa- 
ganda ; Italian scholars and artists being assembled there 



BRIBERY IN TRADE PROMOTION 205 

to imbibe German imperial ideas from German profes- 
sors. 

Professor von Manteuffel was the head of the Insti- 
tute in Florence when the war began. Being a professor 
and thus a non-combatant, he was not expelled from 
Italy, especially as over his house in Florence he hoisted 
the American flag, without any right or reason, except 
to bluff the Italian authorities. It was soon noted that 
his house was being made the rendezvous of the German 
spies and suspected persons in Florence and the police 
decided to make a raid. They found arms and uniforms 
and documents showing that the tolerated professor was 
an officer in the German army serving in a military func- 
tion. Von Manteuffel had no apologies to make. He was 
defiant to the end. He curtly ended all discussion with 
the Italian police by exclaiming, "Art and science are 
political forces." 

The German ambassador in the foreign country, as the 
United States Government revealed in the case of Count 
von Bernstorff, was the expert leader of the organised 
spy system, the briber and the promoter of crime to fur- 
ther the interests of his country. His whole training and 
his manner of operation as the head of an organisation 
whose aim was to take unfair advantage of others, and 
to do this ruthlessly, relentlessly, atrociously, with un- 
tiring persistence and infinite ingenuity, are an indica- 
tion of the well-defined plans for beating down compe- 
tition in the domain of trade as well as in that of politics 
and diplomacy. 

That there are two codes of business morals in vigor 
— American plain-dealing methods as contrasted with 
Germany's spy system methods — has long been known 
to those having intimate knowledge of the international 



206 AMERICA IN WORLD MARKETS 

trade. Lack of exact information on the German code, 
however, caused it to be made light of and readily over- 
looked. We know more to-day about Germany's busi- 
ness spies and the systematic way in which the German 
Government had organised all its resources — diplomatic, 
military and commercial — for the furtherance of the 
"economic penetration' ' in Germany, so that to ignore it 
further would be stretching the ostrich method in busi- 
ness to the point of stupidity. 

The experts of Europe are asking if Germany, after 
forcing practically the whole world to take up arms, will 
force it also into the new form of warfare in which the 
whole resources of the American and other governments 
must be employed, not indeed to imitate the German 
methods, but to uncover them and to keep the world safe 
for honesty in trade. The day has gone by for making 
light of Germany's underhand operations. 

The American business man's frank smile, his hearty 
hand-clasp, his honest methods and his scorn of what 
is mean and underhand do not disarm the German; in- 
deed they encourage him in his confidence that guile and 
underhand dealing will make an easy victim of frank- 
ness and simplicity. And yet American sincerity must 
be vindicated, must be assured of permanent victory. To 
this end American business must lend its utmost efforts 
to making sure that the system which has given birth 
to the spy methods in trade must be destroyed at its 
roots. 



CHAPTER XIV 

HOW TO KEEP AMERICAN INDUSTRY AMERICAN 

Revelations of Extent of German Commercial Domina- 
tion — Consideration of Measures That May Prevent 
Repetition in Future — British Plans for Protecting 
Trade — German Metals Company Controlled World's 
Markets — Incident of St. Andrew's Bay — For a Mon- 
roe Doctrine of Commerce. 

No one dreamed before the war that the foreigner had 
such a strangle-hold on American industry and com- 
merce. Germany alone, according to Attorney General 
A. Mitchell Palmer, former Alien Property Custodian, 
had a stake here worth billions of dollars. Through her 
control of non-ferrous metals she was gradually assum- 
ing domination of the word's steel and iron markets. 
She was potent in our mining, in our manufacturing, 
in our cotton, our wool, our staples of all kinds, and in 
almost every domain of our trade. Without adequate 
return, and practically on the credit reputation she had 
arrogantly awarded to herself, she was using our money, 
our banking resources and facilities for her own enrich- 
ment out of American enterprise, labor investment and 
national resources. The German-owned industrial es- 
tablishments in America, Mr. Palmer has said, were spy 
centres "filled with agents of Germany, long plotting 
against the safety of the United States." 

The war fortunately brought us exact and valuable 

207 



208 AMERICA IN WORLD MARKETS 

information on this astounding condition of affairs. 
With the war now at an end we have unfortunately no 
assurance that we have got to the bottom of the German 
conspiracy against our business. The billions of dollars 
of holdings here, which there is good reason to believe 
are German-owned or German-controlled — not as the le- 
gitimate and honest investment or created wealth of the 
individual German, entitled of course to every guaran- 
tee of right of ownership or possession, but the acquisi- 
tion in the interest of the German State through far- 
sighted scheming of German Government, German bank- 
ing system and German industrial system in combination 
— have not all been seized by our Government. It is 
difficult to get hold of them, for they have been carefully 
disguised. We cannot but labor under the suspicion 
that they are there and that they contribute a continuing 
menace. 

England has enacted legislation to permit a close su- 
pervision over aliens who undertake to engage in certain 
lines of industry and commerce within British jurisdic- 
tion and over alien corporations and aliens entering into 
British corporations. But England's case is different 
from ours. There was no such proportionate number of 
German-owned or German-controlled businesses estab- 
lished in England. In fact England had a much larger 
stake in Germany than Germany in England. 

We have in this regard a special problem all our own. 
The foreigner has had his tentacles right into our vitals. 
If he keeps them there, or if a new cancerous growth 
shoots its roots out in a similar fashion, we may 
not again have a chance to have the danger revealed to 
us and to be able to eradicate it such as the war pro- 
vided. 



TO KEEP OUR INDUSTRY AMERICAN 209 

How then are we going to make sure that American 
industry and commerce will hereafter be kept safe for 
America? Mr. A. Mitchell Palmer, when this query- 
was put to him, said : "I am inclined to believe that the 
fact of our exposing and eradicating what I consider to 
be the great bulk of the German holdings here — we have 
caught some $800,000,000 of German property — will act 
as a powerful deterrent in the future. We have learned 
our lesson, and it is for us to profit by it. What special 
measures may be adopted to prevent a recurrence of such 
an evil of the systematic planting of an economic force 
in America with the deliberate intention of employing 
it for attack against our freedom of action, and for the 
undermining of our ideals and our whole scheme of ex- 
istence, is, of course, quite another question. Congress 
will have the say in that matter. 

"In England certain bills have been prepared, the aim 
of which seems to be the solution of a similar prospective 
problem in that country, such as the Non-Ferrous Metals 
Bill, which prohibits dealing or trading in metals other 
than steel and iron in Great Britain except by special 
license. The special recommendations that may be made 
to Congress with a like aim have not yet been decided 
upon." 

The State Department has announced that the value 
of the property seized by the Alien Property Custodian 
is near $800,000,000 and that claims of Americans 
against Germany and her former allies already filed with 
the Department, total about $750,000,000, with some 
further claims still expected. 

"The Department," it was officially stated on March 
8, 1919, "for several months has had a large force en- 
gaged in the compilation of American losses, which have 



210 AMERICA IN WORLD MARKETS 

been reported to it in response to published requests for 
a very brief statement of losses or injuries of Americans 
attributable to the enemy. Opportunity for a more for- 
mal detailed statement of these claims will be given later 
when the new regulations for their submission are pre- 
pared. 

'The claims are divided into two classes — those aris- 
ing from submarine warfare, and those attributable to 
other acts of the Central Empires. 

"Included in the items comprising claims growing out 
of submarine warfare, are losses alleged for death and 
injury of American citizens; losses suffered in the de- 
struction of or damage to American vessels; losses suf- 
fered in connection with American cargoes in both 
American and foreign bottoms; the loss of much valu- 
able personal property other than cargoes, and many mis- 
cellaneous items of loss and injury. 

"The losses due to other acts of Germany and Aus- 
tria-Hungary include destruction and requisition of 
American property in both enemy territory and territory 
occupied at various times by enemy forces. American 
citizens and concerns at the outbreak of the war had 
about $300,000 worth of property in enemy countries, 
and those which have been under enemy occupation. 
Heavy losses have resulted in connection with this prop- 
erty due to war measures taken by the Central Powers. 

"The American claims in number will run well into 
the thousands." 

The general public, distracted by the succession of 
spectacular events in the great cataclysm of the last five 
years had not, seemingly, been impressed by the revela- 
tion of conditions unearthed since the office of Alien 
Property Custodian was created. It was doubtful even 



TO KEEP OUR INDUSTRY AMERICAN 211 

if the business men of the country had given adequate 
attention to the seriousness of the danger that threatened 
the country as a result of the hold which Germany had 
obtained on its industry and commerce. And yet, with- 
out a certain amount of public interest in the matter, 
the remedies which the situation demanded might be 
overlooked or very imperfectly applied. For peoples had 
short memories and the abject attitude of Germany 
might make us minimise her past offences, if not condone 
them somewhat. Mr. Palmer, realising the true condi- 
tion of affairs, had repeatedly invited public attention to 
the subject and had emphasised the importance of the 
whole country being alive to it. Germany had entrenched 
an industrial and commercial army of invasion in this 
country, and we were not yet wholly rid of it. German 
industrial penetration had been "a knife at the throat of 
America." 

With an investment of only $46,000,000 Germany had 
gained an important measure of supremacy in the worlds 
metal markets, and had thus become a menace, not only 
to the trade, industry and commerce of all the other na- 
tions, but to their very independence. Germany had 
implanted in America one of her pivotal organisations 
for the control of the worlds metal markets. The Amer- 
ican Metals Company was the heart of this organisation, 
cloaked to some extent by a complexity of incorporations 
with stock ownerships difficult to trace. From this com- 
pany there ramified a score or more of branches reaching 
out for some measure of control of, or special interest 
in, the American markets in gold, silver, copper, mer- 
cury, tin, lead, zinc, antimony and other leading metals. 
This German group in America was one of a chain of 
groups around the earth, giving to Germany a certain 



212 AMERICA IN WORLD MARKETS 

primacy in the markets for all the more valuable metals 
which in turn must ultimately assure to her a domination 
over the world's markets for steel and iron, since these 
to-day are dependent on the more valuable metals. 

What was true of the metals industries was true also 
in greater or less measure of all the principal lines of 
industry and commerce of the United States. Mr. Pal- 
mer found that the great German army of industrial and 
commercial invasion, comprising some 200 principal 
companies, "ran the entire gamut of American indus- 
tries. ,, 

The great German industrial and commercial structure 
built up in the United States in the last twenty-five years 
and reaching out also over Porto Rico, the Virgin Isl- 
ands, Hawaii and the Philippines, was growing in recent 
years at an enormous rate and when the war began had 
reached, Mr. Palmer stated, a present money value of 
nearly two billion dollars and a potential economic and 
political value of many billions more. 

The German interests of the American Metals Com- 
pany and of other affiliations of the German Metall- 
Gesellschaft, "which for some years had dominated the 
entire metals market of the world," were taken over by 
the Alien Property Custodian, who has stated that these 
firms had managed during nearly three years of war to 
get such vast amounts of metals into Germany as to fur- 
nish an important part of the strength which enabled 
Germany and her allies to maintain their fighting power. 
He also found that stocks of copper had been accumu- 
lated to be sold to Germany after the war. 

"Germany had aimed to control our plants that were 
essential for our work," Mr. Palmer said. "Great steel 
and iron mills were sending their profits out of America 



TO KEEP OUR INDUSTRY AMERICAN 213 

back to Germany. Great woollen mills in New Jersey 
were pouring their dividends into coffers in Berlin. Great 
metal, mining and mineral companies all over the United 
States, owned or controlled by the Germans, were work- 
ing, not for the United States, but for Germany. And 
these German industries established here, drawing on 
American labor and operating usually with American 
funds obtained on credit, were not merely an economic 
injury to this country; they were also an enemy spy 
system in our midst aiming at our destruction. 

"Down in Florida," Mr. Palmer went on, "the harbor 
not far from Pensacola, known as St. Andrew's Bay, 
perhaps the finest harbor in the Gulf of Mexico, and the 
nearest one on American soil to the Panama Canal, 
proved, as a result of our investigations, to be controlled 
by German money. The Germans had bought thousands 
of acres of land, and had incorporated the German- Amer- 
ican Lumber Company, the ownership of which was vest- 
ed in a member of the German Kaiser's family back in 
Berlin, who had never put a foot on it. They had poured 
millions of dollars into the property, had built a fine 
wharf, had purchased the right of way over all lands 
leading to the shore, so that the United States Govern- 
ment itself could not, in pre-war times, have used that 
harbor for communication with Panama without doing 
business with Germany. It was from the Foreign Office 
in Berlin that this property was directed. The people 
who directed it were the same people who had con- 
structed, in those islands of ours of such vital strategic 
importance to us, the Virgin Islands, formerly the Dan- 
ish West Indies, a steamship terminal for the Hamburg- 
American Line, with a solid masonry structure extend- 
ing for ten feet around it, recalling the big gun emplace- 



814 AMERICA IN WORLD MARKETS 

ments the Germans had in peace times built in France 
on properties they had secured for commercial purposes. 

"Let us keep St. Andrew's Bay in our minds, as an 
object lesson of the highest importance. Let us not 
forget that Germany had planted her spies in the Pitts- 
burgh industries, in commercial and transportation enter- 
prises in New York, in Chicago, in the West and indeed 
all over the country, and that when she unloosed war 
against the freedom of the world, and before we entered 
the conflict, she began actually to wage that war in part 
on our own soil, through her agents and her forces in 
those great industries, and that she was waging that war 
no less against us than against her avowed adversaries. 
If we keep this in mind we shall be all the more resolute 
in insisting on cleaning out root and branch the evil 
growths planted by the enemy foreigner in our land and 
on making such a clean sweep that neither Germany nor 
any other power will be inclined again to attempt any 
similar aggression against our independence and our in- 
tegrity. 

"Stirred by entirely just sentiments of indignation, we 
shall also be disposed to hold up the hands of the nation's 
spokesmen in Congress in formulating the laws that will 
remedy the present situation and best protect us in the 
future. We entered the war in behalf of the ideals of 
Christian civilisation, and we cannot tolerate the foul 
principles of those who would enslave others being estab- 
lished in our own territory and in our own domestic life. 
We hope to bring America, and all that America means, 
to all the world and to see the ideals for which America 
stands spread around the globe, liberty for every one 
everywhere, liberty, national and individual, so that 
America will be the symbol of peace, of welfare and 



TO KEEP OUR INDUSTRY AMERICAN 215 

happiness for mankind. Accordingly we must do well, 
and to completion, the work of destroying the enemy in- 
cubus and spy system to which we have set ourselves." 

In order that there might be accurate and general 
understanding of the scope of his work, Mr. Palmer de- 
sired to draw attention to the fact that he was rooting 
out only such enemy alien interests in American industry 
and commerce as could be regarded as strictly foreign 
and corporate and as representing part of the systematic 
and hostile encroachment of a foreign state on American 
rights and economic well-being. Thus, although the prop- 
erty here of individual alien enemy investors might be 
under sequestration by the Alien Property Custodian, it 
was not his purpose to confiscate that property, or to 
dispose of it to American citizens by sale, unless it could 
be shown that such property was held under the control 
of, or in the interests of the hostile State. 

American business men, it would seem, are alone qual- 
ified to handle this problem in an effective way. They 
are in the best position, if they will unite for the pur- 
pose, to learn the facts, to watch developments where 
their suspicions are aroused, to build up a body of in- 
formation by comparing notes. With the co-operation 
of the banks and of the governing authorities, they would 
constitute the most valuable means of warding off the 
alien danger. Political influence, diplomatic suscepti- 
bility and the thousand and one influences and motives 
that make it difficult for Governments to render adequate 
service in such matters would thus be obviated. 

American business men can lead also in the establish- 
ing of a new world code of business morality. They 
might be the promoters of a Commercial League of 
Nations to codify and uphold commercial laws, to pro- 



216 AMERICA IN WORLD MARKETS 

claim a Monroe Doctrine of Commerce, to throw up a 
barrier against all those whose designs are inimical to 
commercial honesty and rectitude. As they develop the 
get-together habit and as leaders come forth to blaze the 
way, there is every reason to expect that trade and com- 
merce will be elevated to a new plane and that conditions 
will be created conducive to permanent peace and to 
world welfare. 

In the preparing of the new framework of civilisation 
America is summoned to the position of leadership. 



PART III 
WORLD PLANS AND FOREIGN TRADE 

CHAPTER I 

EUROPEAN OUTLOOK ON THE NEW ERA 

Old Individualistic System of Trading Has Gone — Gov- 
ernments Will Participate in Industry and Trade — 
Self-Sufficiency as a Political Necessity — Control of 
Materials — Protection of Key Industries — General 
Agreement Reached at Paris Economic Conference. 

The striking fact manifested in all discussions on re- 
construction in the countries that have recently been at 
war in Europe is that it is realised that the old individ- 
ualistic system of trading cannot be continued as in the 
past. Governments hereafter are going to take part in 
trade and industry. Most of them feel that they are 
forced to do so in order to be able to pay for the war. 

All the nations have had it brought home to them how 
perilous it is for countries to be caught unprovided and 
to be wholly dependent on other countries for the essen- 
tials in the way of raw materials and products needed for 
vital industries. They have realised, consequently, that 
it is incumbent on them to aim at economic independence 
and for this purpose, and as a political necessity, to strive 
to assert and to maintain their own "self-sufficiency" 
and to control as far as possible the raw materials which 

217 



218 AMERICA IN WORLD MARKETS 

they most vitally need and to protect those "key" indus- 
tries on which the production of materials for war 
making and of materials essential to the life of the State 
may depend. 

When the armistice was signed, the war had already 
added new debts of some $145,000,000,000 to the obli- 
gations of the principal European nations which had en- 
gaged in it, Great Britain, France, Italy, Russia, Ger- 
many and Austria-Hungary. An examination of the 
detailed figures would indicate that Great Britain was 
the heaviest loser in this regard and Germany the next 
with respectively 37 and 36 billions of dollars of new 
debts. The figures for both countries, however, com- 
prise loans made to their allies and stocks of war materi- 
als utilisable in peace to the value of many billions of 
dollars. France appears in the list with a new debt of 
24 billions. As a matter of fact it is declared by the 
French authorities that the war imposed on France, not 
merely the greatest sacrifices in blood and in property, 
but also the most crushing financial burden. Her war 
expenses are expected to reach $36,400,000,000 and, in 
addition to this, her exceptional expenses arising out of 
the war are estimated at 5 billions more. As against 
this total of $41,400,000,000, the resources of France 
are placed at only $31,600,000,000. Italy's war debt of 
$9,250,000,000, if added to her pre-existing debt of more 
than $2,750,000,000, makes a total representing two- 
thirds of her entire national wealth. One of the chief 
after- war problems of all these countries is to devise 
means of relieving themselves to some extent of these 
staggering burdens. 

The measures to be taken in the period immediately 
after the war by the Allied countries were outlined in the 






EUROPEAN OUTLOOK ON THE NEW ERA 219 

Economic Conference at Paris of June, 191 6, when the 
Allies agreed to concede to each other prior claims on 
materials needed for reconstruction and to share their 
natural resources among themselves, in preference to 
other countries, during the whole period of commercial, 
industrial, agricultural and maritime reconstruction fol- 
lowing the war, and to fix a time during which in a con- 
certed manner they should defend their commerce, in- 
dustry, agriculture and navigation against dumping and 
other unfair methods of competition, During the period 
fixed the commerce of Germany and her allies was to be 
submitted to special treatment, and goods originating 
from them to be subjected either to prohibitions or to 
special methods of control. The agreement, although ac- 
cepted as having a certain binding force, was never for- 
mally ratified by the legislatures of the various nations 
which had been represented at the Conference. The pol- 
icy of imposing even temporary economic restrictions 
on Germany and her former allies was opposed by the 
American delegates to the Peace Conference. 

A review of the ways in which other leading countries 
are facing the new outlook and of the means they are 
considering or putting into effect for adapting them- 
selves to the changed conditions and for turning to ad- 
vantage the commercial opportunities that are in sight 
may serve to clarify our own views and to guide in the 
drawing up of plans. Henceforth other peoples* prob- 
lems are ours as well. 



CHAPTER II 

GREAT BRITAIN 

Extensive Plans Already Matured — Ministry of Recon- 
struction Has Started New Era Projects — Combina- 
tions in Banking and Industrial Corporations — Report 
of Committee on After-War Policy — Government As- 
sistance to Certain Industries — British Labor Party 
for Nationalisation Scheme. 

None of the European countries appears to have elab- 
orated such extensive plans for the new period as has 
Great Britain. That country established a Ministry of 
Reconstruction to deal with the main problems. Various 
committees under its direction have been investigating 
in the home field special questions of commerce and pro- 
duction, including the supply of materials ; finance, ship- 
ping and common sen'ices; labor and industrial organi- 
sation; rural development; machinery of government; 
health and education; housing and internal transporta- 
tion. The Ministry is assisted by an Advisory Council 
with regard to the international aspects of trade; its work 
is chiefly delegated to its committees which have taken up 
and reported in detailed fashion on questions of raw 
materials, financial facilities for British commerce, the 
preservation of essential industries, combinations and 
trusts, the establishment of new industries, the develop- 
ment of foreign markets, improvements in trade organi- 
sations for the purpose of more economical production, 

220 






GREAT BRITAIN 221 

distribution and marketing. This Ministry has already 
undertaken an important scheme of rural development, 
building light railways through the country districts and 
utilising for the purpose great quantities of railroad ma- 
terial used by the British army in France. 

Great Britain also established a new Department of 
Overseas Trade, also known as the Development and 
Intelligence Department. It is jointly associated with 
the Board of Trade and the Foreign Office and corre- 
sponds in its functions to the Bureau of Foreign and 
Domestic Commerce of the Department of Commerce in 
the United States. The Overseas Department has in- 
troduced reforms in the consular service and has planned 
the extension of the service of trade agents and consti- 
tutes practically a Department of Commerce and Indus- 
try under the Board of Trade and the Foreign Office. 

Great Britain, also through the Board of Trade, has 
introduced important measures providing for changes in 
trade mark and patent legislation, to eliminate the abuses 
which had been committed by foreigners, and particularly 
by Germans. 

An act was passed by the British Parliament in 191 7 
called the Companies' Act, which imposes registration of 
the real names and surnames, nationality, nationality of 
origin, usual residence and other business occupations of 
directors of all companies registered in Great Britain, or 
with an established place of business in that country, and 
doing business under names other than their true names. 
This measure was intended to prevent the foreigner sur- 
reptitiously getting a footing in British industry. 

The British Government also has given detailed atten- 
tion to the question of technical education, and the Board 
of Education has established working plans for promot- 



<m, AMERICA IN WORLD MARKETS 

ing industrial and scientific research. Parliament made 
a grant of one million pounds sterling to be expended 
for industrial and scientific research and plans are being 
made for developing in Great Britain science and indus- 
try according to the most modern and approved methods 
of superior education. The German method of pursuing 
scientific research and experimentation, not in a principal 
way in the laboratories of colleges and universities, but 
in the manufacturing plants throughout the country, will 
also be followed in Great Britain, and indeed by the 
nations generally. 

British joint stock banks have shown a disposition 
to concentrate and amalgamations have been effected 
bringing into eight groups the joint-stock banks which 
had controlled about eighty-five per cent of the total de- 
posits in the commercial credit banks of this class. The 
tendency is also seen in other countries. How Ger- 
many led in the development and concentration of credit 
banks has already been described. 

Important combinations were also effected in the 
Sheffield steel industry and in the brewing and brick 
manufacturing industries and others were quickly 
brought about in the industries which undertook to manu- 
facture the products which had formerly been received 
from Germany and other enemy countries. 

By Royal Charter on April 21, 191 7, the British Trade 
Corporation was organised, with a capital of £10,000,- 
000, to assist British industry and trade in connection 
with new overseas undertakings, contracts and obliga- 
tions, in somewhat the same manner as the German in- 
dustrial banks had been able to do under Government 
direction. The Corporation is authorised "to obtain and 
work concessions* ' and "to acquire and develop re- 



GREAT BRITAIN 823 

sources" in any part of the world. A Portuguese branch 
of this Corporation has been formed for the control of 
the trade of the Portuguese colonies. 

An organisation known as the Federation of British 
Industries had previously been founded to assist the 
Government in framing industrial legislation, in studying 
labor troubles and in promoting British trade interests 
by organised effort. The interests of capital and labor 
are considered unitedly, with the obvious and, entirely 
modern and desirable plan of treating them henceforth 
as an indivisible whole in industry and commerce. 

The British Empire Producers* Organisation was 
established for the purpose of bringing about the eco- 
nomic self -sufficiency of the British Empire and of pro- 
moting the development of Imperial resources to this 
end, or in other words of "organising British industries 
on an Empire basis." 

In 191 7 the British-Italian Corporation was founded 
to promote closer trade relations between Great Britain 
and Italy. It is expected that this Corporation will pre- 
vent the Germans from again dominating in the indus- 
trial life and commercial finances of the Italian penin- 
sula. 

The Committee on Commercial and Industrial Policy 
After the War was the title of a very important investi- 
gating body, at the head of which was Lord Balfour of 
Burleigh. It was appointed in July, 191 6, and has al- 
ready rendered a report to which much consideration has 
been accorded in Great Britain. 

The Committee had, among its many functions, to in- 
vestigate, — 1, the industries which were essential to the 
safety of the nation and the steps to be taken to main- 



224 AMERICA IN WORLD MARKETS 

tain or establish them ; 2, the measures to be adopted to 
recover domestic and foreign trade lost during the war 
and to obtain new markets ; 3, the extent and the means 
by which the resources of the Empire might be de- 
veloped; 4, the extent and means by which the sources 
of supply within the Empire could be prevented from 
falling under foreign control. 

The Committee in its report draws attention to the 
fact that, in the decade immediately before the war, Brit- 
ish industry, "in the long-established manufactures, with 
the important exception of the steel and iron trades, had 
shown great vitality and power of extension, but that 
in the rise and expansion of the more modern branches of 
industrial production the United Kingdom had taken 
only a limited share." The war, however, had forced 
the development of great branches of industry covering 
fields in which the United Kingdom had been more or less 
deficient, and this was recognised as an important gain 
for the future. 

With regard to the question of government control, 
the Committee reported that, while it recognised that it 
would be necessary to continue for some time after the 
war some portion of the control of home and foreign 
trade imposed during the war, in order particularly to 
secure to the country adequate supplies of foodstuffs and 
raw materials for industry and their distribution, it rec- 
ommended that the restrictive measures should be kept 
within the narrowest possible limits and that wherever 
practicable the trades concerned should be entrusted with 
the working of the control under government authority. 
The committee expressed the opinion that the control of, 
and restrictions upon, industry arising out of war con- 
ditions would be found detrimental under normal con- 



GREAT BRITAIN 225 

ditions and should be removed as soon as possible after 
the conclusion of peace. 

It intimated also that any attempt to make the British 
Empire self-supporting in regard to all the raw materials 
for which it depends on foreign countries would be 
neither practicable nor economically sound, and it recom- 
mended that a selective policy be adopted which should 
have regard to the relative importance, industrial or mili- 
tary, of such raw materials and to the source of supply 
and the likelihood of their disturbance in time of war. 

The subject of the essential industries was treated by 
the Committee in a special advanced report which covered 
"key" or "pivotal" industries concerned with the follow- 
ing production: synthetic dyes, spelter, tungsten, mag- 
netos, optical and chemical glass, hosiery, needles, tho- 
rium nitrate, barytes, limit and screw gauges, and drugs. 
As a basis for recommendations on the subject they ad- 
vanced the general principles that "a particular com- 
modity or branch of production which is of great national 
importance at a given time may not continue to be so," 
that "the causes which have rendered British trade de- 
pendent upon the present enemy countries for the supply 
of particular commodities are by no means uniform," 
and that therefore special and separate consideration 
should in the future be given to the study of the essential 
industries and the production on which they depend. 
For this purpose they recommended the establishment 
of a special permanent board to watch the course of in- 
dustrial development and to work out from time to time, 
when necessary, detailed schemes for the promotion and 
assistance of industries concerned with the production of 
the special commodities indicated in the report. 

With regard to the treatment of aliens in commercial 



226 AMERICA IN WORLD MARKETS 

and industrial undertakings, the Committee did not be- 
lieve that it would be necessary or practicable, except for 
a limited period in special cases, to attempt to prevent 
enemy subjects from establishing agencies or holding in- 
terests in commercial or industrial undertakings generally 
in Great Britain. 

On the subject of the establishment of trusts and com- 
binations the Committee held that the increasing inten- 
sity of foreign competition and the revision of British 
industrial and commercial methods made it important 
that the individualistic methods hitherto enforced should 
be replaced by co-operation and co-ordination in regard 
to securing supplies of materials, in regard to production 
and in regard to marketing and merchandising. The 
Committee believed that it would be inexpedient for the 
Government to enter on any policy aiming at positive 
control of combinations in Great Britain, but that it 
would be desirable to have some government department 
provided with information in regard to combinations, 
and that investigation by the State should be resorted to 
in special cases. The Committee was of the opinion that, 
where necessary, combinations should be legalised so as 
to be enforceable between members. 

Dealing with financial facilities for trade, the Com- 
mittee opposed the establishment of any special State in- 
stitution for the purpose of financing trade and industry, 
believing that under normal conditions the financial needs 
of British industry are likely to be attended to in a 
more satisfactory way by private banking enterprise than 
by a State controlled institution. 

The Committee, on the question of tariff reform, pro- 
posed as a basis for the future economic policy of Great 
Britain the following principles: i. Government en- 



GREAT BRITAIN 227. 

couragement for industries of a "pivotal" character, or 
for those of military importance but not of sufficient 
commercial importance to be developed without State 
assistance. 2. Government assistance to other industries 
which are important for the maintenance of the indus- 
trial position of the United Kingdom but which need such 
assistance on account of undue foreign competition, in- 
adequate supplies of raw materials or any other cause.' 
3. A serious attempt to meet the wishes of the Domin- 
ions and colonies for the re-adjustment of their economic 
relations with the United Kingdom. 4. An effort to de- 
velop trade between the British Empire and the Allies. 
5. At least temporary discrimination against Germany 
and her former allies in the matter of trade with the 
British Empire. 

In conjunction with the Ministry of Reconstruction, 
the Local Government Board has undertaken the work 
of constructing 100,000 houses for returned soldiers, of 
building model towns, of replanting forests, of develop- 
ing transportation and electrical supply and of improving 
dwelling conditions, health and education. 

From Great Britain came the proposal for an Inter- 
national Labor Commission, with representatives of 
both capital and labor of the great Powers, to handle 
labor problems internationally — such as right to or- 
ganise, hours of labor, minimum wages, child and fe- 
male labor, insurance and the settlement of labor dis- 
putes. 

British labor is highly organised — with more than 
4,000,000 members in the Trade Union Congress and 
nearly 1 ,000,000 in the General Federation — and it is re- 
suming its important political, social and economic in- 



228 AMERICA IN WORLD MARKETS 

fluence which was left practically in desuetude during the 
war. 

In consequence of increasingly vigorous agitation on 
the part of labor, various expedients have been resorted 
to by the British Government to maintain industrial 
peace. The so-called Whiteley Councils — industrial 
committees of employers and employes in individual 
businesses, organised in accordance with the recom- 
mendations of the Whiteley Committee in the House of 
Commons to consider and settle amicably the questions 
arising in the particular business — did not produce any 
notable results, due, it has been stated, to the fact that 
existing forms of factory organisation, including the 
"shop steward' ' system, militated against them. What 
has been regarded as an important step towards the har- 
monising of the interests of capital and labor was the 
convoking by Premier Lloyd George of the British "in- 
dustrial parliament." Three hundred leading employ- 
ers were summoned to sit in session with 500 labor dele- 
gates, representing, it was said, about 10,000,000 Brit- 
ish workers. The Premier directed the session and ar- 
rangements were made for the formation of commit- 
tees to investigate and report on questions that have in 
the past constituted the subject-matter of irreconcilable 
contentions. High hopes are founded on the "industrial 
parliament" in view of the fact that the employers and 
labor delegates composing it revealed in its first session 
a markedly conciliatory attitude. 

In behalf of the British Labor Party, which consti- 
tutes the political representation of more than 3,000,000 
union workingmen, Mr. Sidney Webb and other party 
leaders have drawn a labor platform. Home rule and 
public ownership are among its key-notes — nationalisa- 



GREAT BRITAIN 229 

tion of lands, railways, mines, electric-power plants and 
the like, government ownership and control of public 
utilities, and home rule for Ireland and for the other 
integral parts of the British Empire. It advocates free 
trade, the minimum wage, public work or maintenance 
for the unemployed, a steeply-graded income tax with 
an initial levy on capital and the reconstitution of society 
on a socialistic basis. Its hope is to establish in England 
"a healthy, unified and contented society." 

Labor has not at present the direct power in the Brit- 
ish Parliament to warrant the expectation that its pro- 
gramme can be forced into adoption. 



CHAPTER III 

FRANCE 

Reconstitution of Devastated Territory Is Chief Con- 
cern — Labor Disturbed by Syndicalist Doctrines — 
Project of National Economic Council — America Re- 
garded as "Guardian Angel" — Expectation of Co-oper- 
ative Service — The Principal Needs of France — Gov- 
ernment Proposes National Federation of Employers. 

France, in her urgent need of attending to the recon- 
stitution of her devastated territories and of her ruined 
industries, has not had occasion to go as deeply as Eng- 
land has done into detailed plans for economic recon- 
struction and preparation for trade, domestic and for- 
eign. Apart from rebuilding in the ruined sections, her 
plans generally have dealt with such questions as the in- 
stallation of water-power plants and the development of 
railway and waterway transportation and colonial de- 
velopments. 

The French State itself has done less in regard to the 
laying of detailed plans than have certain private organ- 
isations, such as the Association Nationale D'Expansion 
Economique, which has been preparing an economic 
survey of the country, and the Comite Republicain du 
Commerce, de l'lndustrie et de 1' Agriculture. These 
bodies have been formulating the views of commercial, 
industrial and agricultural organisations with regard to 
the changes in the economic structure of the country 

230 



FRANCE 231 

brought about by the war and preparations for the 
future. Other associations are preparing for the pro- 
tection of French products and for the improvement of 
riverway transportation, particularly of the Rhone River 
from Geneva to Lyons, while the Finance Department is 
considering the revision of customs tariffs, and the De- 
partment of Commerce has a staff of experts working on 
economic problems. 

France still suffers in her whole national life from the 
terrible wounds of the war and has reason to be aggrieved 
at the knowledge that, in comparison, Germany is un- 
scathed and relatively prosperous. The French feel 
that their claims on the Allies as a body are paramount 
and that aid must be furnished to them from every quar- 
ter where it is available for the purpose of restoring to 
France an opportunity to start off again on independent 
national life so that the heroic Republic may not incur the 
danger of weakening economically and going down into 
the ranks of the minor nations. French economists 
have long felt that in compensation for the great loss of 
French lives — more men of France were offered up in 
the bloody sacrifice than of Great Britain, Italy, Belgium 
and America together — and the appalling destruction in- 
volved in the fact that France was made the principal 
battleground of the war, her co-belligerents who escaped 
similar disaster and who owed their salvation to the self- 
sacrificing stand which France had taken, will consider 
a practical measure of pooling of resources of every 
kind and will recognise the right of France to a prior 
claim on them. 

Labor in France had been to some extent affected 
before the war by the revolutionary doctrines of the 
"Internationale/' which was fostered by the German 



2S2 AMERICA IN WORLD MARKETS 

Government for the purpose of weakening France. The 
unpatriotic demeanor of the Syndicalistes still continues 
as a baneful influence. Labor agitators, advancing quite 
commendable doctrines to the effect that workers in 
the future should not agree to continue the form of life 
which had existed before the war and have a right to par- 
ticipation in the direction of affairs in which their share 
is an essential one, have been expanding these doctrines 
into more or less subversive principles. 

The French Government is planning to check move- 
ments of this kind, and to organise labor for its own 
benefit, so that it may see where its best interests lie and 
may aim at changes which are of benefit to the workers 
without being of evil effect for the whole nation, includ- 
ing the workers. The "moderate" workers of France 
have formulated a programme demanding the establish- 
ment of a minimum wage law and of an eight-hour day, 
the maintenance of wages that will warrant a satisfac- 
tory standard of living, legislation to prevent labor from 
being treated as a commodity and from being detri- 
mentally affected by the influx of foreign workers. 

The French General Federation of Labor has peti- 
tioned the Government to establish a National Economic 
Council, to be composed of manufacturers, workers, 
farmers, technical advisers, Government representatives 
and legal and economic experts. This Council would 
have as its purposes to improve the economic condition of 
France and to develop and co-ordinate the nation's pro- 
ductivity. 

One of France's most serious problems, apart from 
the restoration of her devastated territory, is the repres- 
sion of undisciplined agitation under the guise of labor 
movements and the settlement of labor questions, 



FRANCE 233 

In March, 19 19, the French Minister of Commerce an- 
nounced that he was instigating the organisation of 
French employers into a national federation. Business 
men in France, divided into twenty groups, had been 
organised only in a multitude of small associations. 
Some 5,000 of these had a membership of 400,000. 
Through lack of any centralising body the employers 
were at an acknowledged disadvantage when confronted 
with organised workers. The French General Federa- 
tion of Labor has been powerful through its controlling 
leadership with a machinery for exerting political in- 
fluence and for enforcing its demands. Despite the 
known socialistic tendencies of government in France for 
years past, the Clemenceau administration decided that 
it was not for the benefit of the country that one ele- 
ment of industry and commerce should have an undue 
domination and that, as the employers had failed to or- 
ganise of their own initiative, the Government would 
urge them to do so and direct them in the process. 

With regard to reconstruction generally, France, as 
has been said, counts on foreign assistance, and in par- 
ticular on that of the United States. M. Andre Tardieu, 
French High Commissioner to the United States, has 
stated briefly under five heads the forms of aid which 
France expects from this country: help of our military 
organisation in clearing territory of the ruins of war; 
supply of materials; machinery for industrial plants; 
credit to cover importations, and ships to be chartered to 
France to enable her to restore the interrupted commer- 
cial service of the country. 

The United States is now *Tange gardien," the guar- 
dian angel, on whom France has come to rely. The 
action of leading American business organisations in 



234 AMERICA IN WORLD MARKETS 

extending the hand of friendship to France has called 
the French chambers of commerce to new life and activ- 
ity, and has smoothed the way for the creating of com- 
mercial and industrial associations in France to aid in 
planning and carrying out the campaign of construc- 
tion. The American Industrial Commission to France 
of 1 91 6 outlined the principles on which American co- 
operation could be based and the French governing 
authorities expressed hearty approval of them and have 
been counting on their establishment and on the action 
and benefits to accrue from them. 

"We have come," said Mr. W. W. Nichols, Chairman 
of the Commission, addressing the French Reception 
Committee when the Commission landed at Bordeaux, 
"as a group of American business men with a vision — 
to do what we can to promote commercial reciprocity. 
How can we serve France? If we know that, then we are 
in a position to help mutually. We are here to offer 
our services. Tell us your needs and we shall exert our 
best influence in filling them. We have no other aim. 
We are not looking for mere selfish commercial expan- 
sion. We seek primarily the opportunity to be of as- 
sistance and then desire to study with you the way in 
which America can further aid and promote commercial 
development with France. 

"The exigencies of war," he continued in substance, 
"at present leave the trade balance against France with 
a vengeance, and this harms our Franco-American rela- 
tionship. We want to help in righting this unequal con- 
dition of affairs as soon as possible. 

"This is the policy we propose to recommend to our 
people. We believe the hour has come when those inter- 
ested in international commerce must acquire a new and 



FRANCE 235 

more exalted notion of the obligations which their re- 
lations with foreign countries impose. We feel that the 
merchant and manufacturer-exporter should become pen- 
etrated with the feeling that their first aim should be, 
not the acquisition of gain, but commercial service car- 
ried out in such fashion that it will be of the greatest 
benefit to the customer nation they serve as well as to 
their own nation, and consequently to themselves. Far 
from wishing to profit by the difficulties in which France 
now finds herself, we are anxious to serve France and so 
to conduct our business relations with France that the re- 
sult will be mutually and reciprocally beneficial to 
France and to the United States. Our ideas in this re- 
gard may be more specifically expressed by stating that 
America, on account of her special natural resources, is 
in a position to produce and to furnish certain articles 
and commodities, while France on her side, on account 
of her artistic nature, long in the making, and the high 
intelligence and business equipment of her people, is 
peculiarly qualified to produce and furnish products of 
a different kind. 

"It must be our aim to supply to France our special 
products and to accept from her in return her distinctive 
products and, desirably, as nearly as possible of equal 
value. We should not seek to interfere with industry 
peculiar to France, and France should not plan a fierce 
competition with us in regard to products which are in 
a peculiar way our own. The feeling inspired by such 
a rivalry will frustrate the promotion of better things. 
The only information, therefore, which we seek is how 
we can render service to France for the reconstruction 
of her devastated territory, for the supplying of her in- 
dustrial needs and for the creation of new enterprises 



236 AMERICA IN WORLD MARKETS 

which will further the economic well-being of the Re- 
public." 

The French welcomed this announcement, which took 
due account of the pride and amour propre of a great 
nation, since it was a plan for mutual aid, and they pro- 
ceeded to organise commissions and to formulate ar- 
rangements for national development when the day of 
peace should come. They rejoiced at the prospect of an 
entirely new spirit being inspired into the old methods of 
commerce. They knew that commercial greed was the 
root of the evil which precipitated the war of world-wide 
devastation, that America was, after all, in the war with 
the expressed purpose of changing for all time the con- 
ditions which led to the war, of supplanting might by 
right, of replacing rapine and terrorism by fair and hon- 
est principles of international relations, and that to attain 
this end it would be essential to wipe out old iniquitous 
principles of commerce and to put fair dealing in the 
place of selfish highhandedness. 

Foreign trade, the French had always insisted, im- 
plies exchange, not exchange of products for money only, 
the mere medium of exchange, but of products for prod- 
ucts, natural, industrial or their equivalent in services, 
that they who sell should also buy, and they always re- 
sented an unfair attitude in this regard by others. Thus 
it had unfortunately happened that owing to the special 
character of the laws and prescriptions which regulated 
the tariffs imposed by the United States, and owing to 
unscrupulous practices by traders operating from 
America, the French had considered that they were not 
equitably treated, and they denied to the United States 
the privilege of the most favored nation in the matter of 
imports. Indeed, America alone of all the great nations 



FRANCE 237 

had found an extra tariff barrier raised against her ex- 
ports to France, the duties on some American wares 
being double what they were on similar goods imported 
into France from other countries. This is concrete and 
practical evidence of the need of embarking on new lines 
of international business policy. 

France has been getting ready; the big work is still 
ahead. 

The needs of France, which can be filled only from the 
United States, are on such a vast scale as to make heavy 
demands upon the industrial and manufacturing possi- 
bilities of this country for several years. Thousands of 
towns and villages have been destroyed and a rich and 
prosperous territory made worse than a wilderness. Not 
merely raw material — lumber, brick, steel and iron, 
cement and the like — will be needed from the United 
States, but also much that enters into the reconstruction 
of buildings and the equipment of centres of population. 
In the war zone more than a score of different kinds of 
textile industries, as well as agricultural, mining, metal- 
lurgical, mechanical and electrical industries, had before 
the war engaged the activities of some 2,000,000 workers 
and had produced products of an annual value exceed- 
ing two billion dollars. From America must go the 
bulk of the raw materials and the finished machinery and 
manufactured articles that will be needed if these in- 
dustries are to be replaced. 

The French Minister of Industrial Reconstruction has 
stated that the restoration of the coal and industrial dis- 
tricts of the Departments of Nord and Pas de Calais will 
cost at least $15,000,000,000. 

Throughout the rest of France the need for the sup- 
plies which only America can furnish is hardly less than 



238 AMERICA IN WORLD MARKETS 

in the war zone. Plans have already been made for the 
installation of hydro-electric plants of approximately 
750,000 horse-power, and a further installation of 3,000,- 
000 horse-power is intended. The mechanical industries 
to which this power will be applied will make demands 
on the United States for many kinds of machinery in 
great quantity. 

France is confronted with a serious shortage of man- 
ual labor. Her industries to-day are short of millions 
of men, and it will be impossible for her to continue to 
depend upon female labor as a substitute. Female labor 
has been saving the nation, but it can be only a temporary 
expedient, restricting the progress of France in other 
ways while it lasts. So impressed was the French Gov- 
ernment with the gravity of this situation that at the out- 
set it constituted the principal reason for the invitation 
extended by the Government to the American Industrial 
Commission to visit France, the need for labor-saving 
machinery and devices being imperatively urgent. Serv- 
ices in practically every domain of modern human effort 
will be needed by France from the United States. In- 
deed there will be similar need on the part of Belgium, 
Italy, Serbia, Roumania, and to a minor extent by other 
countries. 

Taking the only proper view of Europe's expectations 
from America and regarding the situation not as oppor- 
tunity for commercial gain but as humanity-service, one 
is almost appalled at the weight of the burden which is 
about to be thrown on all the industrial, commercial and 
service resources of the productive brains and of the 
skilled labor of the United States. 

It is with regard to France that the first steps must 
be taken and the course followed in her case will almost 



FRANCE 239 

certainly be the course to be pursued with regard to the 
other countries. 

The practical upshot of the discussions between the 
American Industrial Commission and the French was 
this : Commissions representing the various groups of in- 
dustries interested in the work of reconstruction and in- 
dustrial upbuilding in France should go to that country 
to investigate conditions in detail on the ground, and to 
negotiate with the French regarding the services to be 
rendered; commissions of French business men should 
come to America for a like purpose. The French Gov- 
ernment agreed to lend its most energetic co-operation 
to the work. 



CHAPTER IV 



ITALY 



Restriction of Emigration — Intended that Italian Work- 
ers Going Abroad Shall be Skilled — Industrial Devel- 
opment in Italy — Declaration of Rights by Business 
Men — Industrial Association Issues Proclamation — 
Capital Will No Longer Tolerate Unequal Conditions 
— Italy an Inviting Foreign Market — Danger of Ger- 
man Penetration Again Threatens. 

Italy is among the countries which, before the war 
ended, had been making elaborate plans for the after- 
war period. A Government Commission, divided into 
seven committees and presided over at its main session 
by the Italian Premier, Signor Orlando, had worked out 
important plans with regard to the following subjects: 
labor ; public works ; the organising of credits ; technical, 
mechanical and artistic education of the people; the de- 
velopment of communications and transportation ; social, 
political and economic reforms. 

It is interesting to note that the committee which 
had to do with labor rendered a decision, which later 
received general endorsement, that henceforth Italian 
emigration must be restricted. Italian workers, accord- 
ing to the plans advocated, must hereafter obtain permits 
to go abroad. The committee stated that all Italians 
were well aware of the fact that the prestige of the king- 
dom had not by any means been enhanced by the class of 

240 



ITALY 241 

Italian labor which went to foreign countries ; that, as a 
matter of fact, the country was often judged from the 
poorest of its citizens who in foreign countries labored 
at the humblest kind of unskilled work or earned a liv- 
ing with street organs. Hereafter, it is proposed, the 
Italians who go abroad shall not be destined for sewer 
digging and road grading. 

Before he can receive a permit to emigrate, the Ital- 
ian, if the plan is carried out, will have to qualify as 
a skilled worker. For this purpose institutions are to be 
founded in Italy where the men shall receive technical 
and mechanical training. A central organisation under 
the direction of the Government will handle the entire 
question of emigration and it will have bureaus estab- 
lished throughout the kingdom where all details will be 
available for the emigrant regarding foreign countries, 
rates of labor and social conditions, and where from 
time to time workmen may receive permits to go abroad. 

Before the war the number of Italian subjects in for- 
eign countries, as estimated from the Italian Emigration 
Division's statistics, was approximately 7,000,000, in- 
cluding women and children. Forty-eight per cent were 
in South America, thirty-two per cent in North America, 
sixteen per cent in Europe, three and a half per cent in 
North Africa. The adult males under 55 years of age 
were placed at slightly over 1,000,000. About one-half 
of these returned for the war, leaving some 500,000 able- 
bodied Italians abroad, of whom about 370,000 are 
laborers. The war not only stopped the outflow of Ital- 
ian laborers ; it also rectified to a considerable extent the 
Italian economic balance by bringing home one-half of 
the valid workers. 

The same committee, dealing with labor, has further 



242 AMERICA IN WORLD MARKETS 

proposed the introduction of reforms which are intended 
to make working conditions in Italy far more attractive 
than they have been in the past, the workers to have 
facilities for training not merely in the trades, but also 
in artistry, so that their work may be of a superior kind. 
Plans are also made for State insurance and protection 
of the workingmen's families on the general principle 
that the State must continue to do for the citizen and 
his dependents what it showed it could do for the soldier 
and his dependents during the war. 

The war brought to Italy a very notable industrial 
development, and an important industrial organisation 
has resulted from it which is expected to be of great 
benefit in establishing Italy as a centre of production 
in the future. The mining and mineral industries, pro- 
ducing iron, copper, antimony and mercury, were de- 
veloped in a notable way to satisfy military needs. There 
was also an extensive growth in the metallurgical in- 
dustry, in spite of the enormous increase in the price of 
coal and the difficulty of getting steel and iron from 
abroad. Manufacture of war material, guns, projectiles, 
naval equipment, took on a feverish activity during the 
war. The production of automobiles in a great variety 
of types was also a notable development. The textile 
industries, cotton, wool and silk, went ahead progres- 
sively, as did also that of tanning and shoemaking. 
Chemical industries, particularly for production of ex- 
plosives, saw a very notable development, and many 
new forms of chemical products were made in Italy, and 
it is expected will continue to constitute industries for 
that country. 

The Government operated more than a thousand main 
and auxiliary factories with some half million working- 



ITALY 243 

men and more than 100,000 women. These factories 
produced artillery, aeroplanes, automobiles, bombs, cart- 
ridges. More than 400 factories produced explosives, 
chemical products and mining and extractive industrial 
products. Besides these, 1,500 factories were devoted 
almost in their entirety to the production of projectiles. 
Italy's industrial motto at this time was "Produce much, 
produce well, produce cheaply. ,, 

Italy is all ready for work in the new period and is 
anxious to grow to be the great power which her present 
position by the side of the United States, England and 
France warrants her in feeling confident she is entitled 
to be. She seeks colonial expansion so that her workers, 
if they do emigrate, may be able to go where they will 
still be Italian citizens. In a confiding, even touching, 
way she appeals to the United States for the help on 
which she has been counting from this country. 

America has raw materials and has the financial 
strength to help Italy and Italy has been petitioning this 
Government to send to her a commercial attache as well 
as American trade commissioners to study with her the 
commercial needs of her people, to plan the assistance 
which the United States should render to her and to 
outline a system of foreign trade relations which would 
be of benefit to both countries. She has the labor and 
skill and the energy to become great commercially if she 
will but be provided with the materials and with the 
financial aid which the United States can provide. 

Italian manufacturers and merchants are making a 
vigorous bid for better treatment not only at home, but 
also in foreign markets. Tired, as they declare them- 
selves to be, of misrepresentation of their products and 
of the credit barriers which have been raised against 



244 AMERICA IN WORLD MARKETS 

them, they decided on organisation and have taken the 
bull by the horns and have demanded that their Govern- 
ment join them in insisting on the rights which belong 
to them in the world's commerce. 

Many Italian manufacturers found themselves entan- 
gled in German commercial banks, often without know- 
ing beforehand that the bank had any foreign connection 
whatever. It was a shock to the entire Italian nation 
when, after it entered the war, it learned that the best- 
known commercial bank in the country was, as far as 
control was concerned, practically a German institution. 
Some of the smaller private banks were openly German, 
but most of them had Italian, French or English names. 

American tourists will recall their surprise at the cour- 
tesy of the German or Swiss hotelkeepers in the prin- 
cipal cities and resorts of Italy who recommended them 
to nicely kept little banks, usually one or two flights up 
in the building in which they were located, where they 
were amiably received by clerks who spoke English with 
a quaint cockney accent, and where they obtained better 
rates of exchange than the Italian money-changers of- 
fered. The tourist indeed will recall that during his stay 
in Italy he had remarkably little direct intercourse with 
Italians, not only his hotelkeeper and waiters and cham- 
bermaids being foreigners who spoke more or less Eng- 
lish, but also the guides who took him to the churches 
and the museums, the directors of the special music halls 
to which he was taken and in which German and English 
acrobats and singers appeared, and even the managers 
of the slumming places, if he were weak enough to al- 
low himself to be led to such places, and the souvenirs 
and photographs which he purchased, if they were not 
actually labelled "made in Germany, ,, were sold to him 



ITALY 24* 

by non-Italians. Indeed, usually he left the wonderful 
land of Italy without a high appreciation of the Italian 
people. Some one always took occasion to quote to him : 
"Here man alone is vile/' 

But now Italy will no longer stand for misrepresenta- 
tion. The merchants and manufacturers of Italy have 
started a campaign in behalf of their country and they 
hope to make the whole world give due recognition to it. 

Italy wants help from abroad. From America, as 
has been said, she desires raw materials for her industries 
and machinery for factories to render her independent 
of German or other domination in the future, and expert 
labor to start these factories and credit arrangements in 
consonance with her standing as one of the four leading 
powers of the hour. In obtaining these and the manu- 
factured products for which she furnishes a market, she 
wishes to be freed forever from the hampering condi- 
tions which in the past governed her trade with certain 
countries. The merchants and manufacturers expect 
that the Italian Government will formally back them in 
this effort. They demand new and better conditions in 
importing products from the United States and other 
countries, and they demand fair treatment in placing 
their own products on foreign markets. 

This decision was reached in a congress of Italian 
manufacturers and business men, held under the auspices 
of the Association of Italian Incorporated Companies, 
but open to all Italian employers in good standing. The 
gathering regarded itself as the authorised representa- 
tive of capital in Italy, and it dealt, not merely with 
the commercial, industrial and economic needs of the 
Italian kingdom and the question of foreign markets 
and business relations, but also of the relations of capital 



246 AMERICA IN WORLD MARKETS 

and labor and of capital with the Government. It 
intends to see to it that capital, at least in Italy, will get 
better times, that it will no longer be the sport of poli- 
ticians and that it will not tolerate from the Government 
such treatment as it has submitted to in the past. It 
has mapped out a new direction which it has formally 
agreed to pursue, and the Association which represents 
it is the most powerful body in the economic life of 
Italy. 

A proclamation which it has issued is such a striking 
document — a veritable Declaration of Rights of industry 
— and covers in such a comprehensive way the main fea- 
tures of Italy's industrial and commercial life, that it 
will well repay consideration. It furnishes an opportu- 
nity to examine in some detail the sentiments, aspirations 
and plans for action of business as an organisation in 
one of the great nations. 

With the upheaval brought by the war, the proclama- 
tion says, old theories, old methods, old dogmas, old 
ideas are going by the board. This applies to the 
political and social domains, but far more so to the 
economic domain. The vital interests of the producing 
classes in Italy must be recognised to be the vital in- 
terests of the nation, and they must be protected against 
the foreigner with one-sided aims. The German domi- 
nation kept out of Italy to a great extent the American, 
French and British traders. Italy must be opened wide 
to all of them and must also assert her right to enter 
their markets. 

The war has ended the old prejudice which had been 
fostered in Italy against capital. 'Tor all too long," the 
proclamation says, "with the psychology of a poor nation, 
both official Italy and popular Italy held capital in sus- 



ITALY <W 

picion and Kept it constantly in a defensive and apologetic 
attitude. The Government did not dare defend it, and 
the demagogue had a free hand in arousing the jealous 
passions of the poor against the rich, of the unfortunate 
against the producers of wealth." The war has shown 
what the affiliations of many of Italy's blatant dema- 
gogues were, and how attacks on capital and on Italian 
industries were a part of the German intrigue in gaining 
economic control in Italy. 

While for years in the Italian parliament and on Ital- 
ian platforms, the Association affirms, one form or other 
of the sources of national wealth production was under 
attack by the demagogues, "the nation's best interests 
were neglected and the foreigner profited of the chance 
to dump his products on our market and to conduct an 
underhand campaign to discredit Italian products in Italy 
and abroad. But for the war this condition would prob- 
ably have continued till the German invasion of Italy's 
economic life had suffocated all the initiative and re- 
sources of the country's productive capacity." 

The foreigner's work it is admitted was aided by errors 
at home. Capital in Italy, seeing itself the object of so 
much prejudice and attack, remained within its shell. 
It kept out of the political field; it did not mingle with 
the other classes ; it did not defend itself ; it did not offer 
its co-operation to the Government. But now capital 
knows its great power and it is going to use it. It knows 
that the producers are strong if they work together, and 
the populace now knows that the condition of the work- 
ing people can improve only when production improves 
and is prosperous. The time has come to fix enduringly 
the happy conditions which the war brought about. Capi- 
tal, that is the wealth producers of the nation, are deter- 



248 AMERICA IN WORLD MARKETS 

mined to take active part in public life so that they can 
defend their own interests without leaving their defence 
to others. 

There is to be a new way of merchandising in Italy, 
not only on the part of the manufacturers and merchants 
in dealing with the home and foreign markets, but also 
on the part of the Italian shopkeeping trade. It is by 
the establishment of fixed prices. 

The old wearisome method of bargaining over every 
sale and purchase between manufacturer's salesman and 
retailer and between retailer and consumer, with the 
waste of time and the stirring of bad blood that haggling 
over the price of everything bought entails, with the seller 
usually dissatisfied at the profit he has received and the 
buyer suspicious that even with all his expert trading he 
has paid too much for the article, must be done away 
with. The foreigners' stores in Italy, which traded by 
fixed-price methods, had been reaping the profit of the 
ill-advised, old-time Italian method, but the people per- 
sisted, when dealing in Italian stores, in keeping up the 
system of bargaining. A well-organised campaign, with 
an appeal to the patriotic instincts of the people, has been 
planned to enable the retailers to end for all time the ut- 
terly unsatisfactory method which from time immemorial 
has been in vogue throughout the kingdom. 

Hereafter, Italy's business men are resolved, publicity 
will be invoked, and all efforts that capital may make for 
its own benefit and that of the nation will be made openly 
with direct appeal to public opinion, and not clandestinely 
or with mere appeals to the governing powers. When 
the campaign is publicly conducted it will be easier to 
show that there is no antagonism between producer and 
consumer and that the whole nation is interested in the 



ITALY 249 

same problems. When the public is convinced of this 
truth it will prevent the repetition of the blunders of yes- 
terday, when parliament, government and public admin- 
istration gave no attention to the exploitation of the 
nation's sources of wealth, nor to the development of 
agriculture on modern methods; failed to encourage the 
maritime and the mining industries ; took no steps for the 
adequate defence of the economic independence of the 
nation. Native enterprise got small encouragement. 
Italy was wide open for German exploitation. 

"There is not only no antagonism between our class 
and the working class," the proclamation says, "but every 
gain by our class benefits every other class in the coun- 
try, so that when production is large, profitable wages 
are paid and money circulates freely, whereas when pro- 
duction is poor and unable to struggle against foreign 
competition, the working classes are the first to suffer 
and the whole nation feels the depression." 

In the new order of things capital must have a new 
relation to labor. Capital in Italy is in different condi- 
tion from what it is in many other countries. In Italy 
there are no great concentrations of inactive wealth of 
a feudal type. There is practically no income without 
work. Italy's business men are hard workers. Capital 
in Italy considers itself as constituting one of the work- 
ing classes, and on account of its position it now under- 
takes to be the first to put the lessons of the new times 
into force. Capital has the duty and it is to its interest 
also to insist on the betterment of living conditions for 
labor, on its technical improvement and moral and 
intellectual elevation. Capital, therefore, proposes bet- 
ter schools; it proposes insurance against accidents and 
pensions. Gradually the distance, moral, mental and 



250 AMERICA IN WORLD MARKETS 

economic, between capital and labor must be lessened. 

"Our class is not an oligarchy or a closed house; it 
is open to all, the only requirements being culture and 
work." Being a working class itself, capital in Italy now 
desires "tranquil and fruitful relations with the other 
working classes." To this end it demands that the law 
make labor contracts more rigid and binding, and that 
it determine specifically the rights and obligations of 
both parties under such contracts. In this way only can 
strikes and lockouts be made an impossibility in the 
future. 

The relations of industry and agriculture in Italy have 
long been misrepresented and misunderstood. There 
is really no antagonism between them. They should unite 
in working for the economic independence of the nation. 
"Their motto," the proclamation says, "should be: 'Let 
Italy suffice for herself; let her be removed from depen- 
dence on the foreigner; let her be put in a position to 
compete with the other nations in the international mar- 
kets/ " Agriculture, therefore, must be fostered. Mod- 
ern machinery and implements must be obtained for it 
and modern methods applied. Transportation facilities 
must be provided as well as suitable markets, and ar- 
rangements made for financing the farmer and his crops. 
When this is done the Italian farmhand will not so easily 
be induced to emigrate. 

The State must collaborate with Italian capitalists to 
intensify manufacturing and industrial production and 
to make the country free from the German or any other 
yoke, and to obtain for Italy the position in foreign mar- 
kets which rightly belongs to her. The State must 
cast aside the old fallacies. State and municipal owner- 
ship of industries is one of these fallacies that must be 



ITALY 251 

abandoned. "Such control, except of certain necessary 
services of public order, is neither profitable nor beneficial 
to industry nor to the nation." Parliament should also 
carefully avoid interfering with the quiet and orderly 
progress of industry. It should aid production in every 
way and not handicap it with ill-considered legislation. 

New principles of taxation are demanded. This de- 
mand will interest American merchants and manufac- 
turers who have desired to establish business branches 
in Italy and who have been bewildered by the Italian 
laws on taxation. It may be said here, incidentally, 
that there are two kinds of taxes on the corporation doing 
business, one on the "Ricchezza mobile, ,, and the other 
on the "Ricchezza immobile," and no two persons in 
Italy seem to be in accord on what is specifically implied 
in these terms, which may be translated "fluid resources," 
capital, turnover, profits and the like, and "fixed re- 
sources," property of all kinds other than the fluid re- 
sources. In the same Italian city one American corpo- 
ration will find itself called upon to pay taxes on the 
basis of its whole capitalisation and operations in the 
United States, while another is merely asked for con- 
tribution on the basis of its business in Italy, and still 
a third gets off on the mere consideration of profit on its 
local transactions. Certain lawyers who are specialists 
in this matter can arrange for entirely reasonable terms 
for their clients. 

The trouble is that in Italy there are five different 
supreme courts. The rulings of any one of these may be 
good law for the whole country, but where all have ruled 
on the same subject and have ruled diversely, there is 
confusion, and the foreign corporations find themselves 
taxed in very widely different fashion, according to the 



252 AMERICA IN WORLD MARKETS 

one of the five zones in which they happen to have estab- 
lished the "sede sociale," or corporation branch domicile, 
in Italy. The five supreme courts sometimes hold in 
Rome a meeting of what they call the "United Sections" 
and decisions reached by this body on any point are 
final law for the whole country, but they have not yet 
done so for the complex problems of business taxation, 
and the best the foreigner can hope to do at present in 
Italy is to have his attorney make a reasonable bargain 
with the chief tax collector of the zone in which he 
happens to be located. The chief tax collector is in 
practice the court of last resort. 

All this is to be changed, if the new plans are carried 
out, for the Italian merchants and manufacturers them- 
selves have almost equally serious complaint to make 
against the taxation system. 

A proposal which the association makes is that capital 
which boldly takes risks in business and creates and multi- 
plies wealth should in the matter of taxation receive quite 
different treatment from capital which takes no risks, 
and that corporations should not be taxed, as at present, 
on their assets, but only on the dividends which they 
have earned. In the matter of extra taxation to pay war 
debts, "the Government should reach agreements with 
the producers and cause as little upset as possible to the 
industries." 

New tariff regulations are also demanded for Italy. 
The association does not take sides either with the 
principle of free trade or that of extreme protection, 
but it declares that a tariff wall should be put up which 
will protect the present infant industries of the country 
until they can take care of themselves. 
The high-cost-of -living problem, it is asserted, which 



ITALY 253 

is agitating the whole nation can be solved if the Gov- 
ernment will devote its resources to furthering native in- 
dustries so that they can supply the people's urgent needs 
without relying on the foreigner. If the Germans or 
other foreigners are allowed to fight Italy's industries in 
Italy they will become the despotic rulers of her home 
markets. 

The whole system of State administration, the Italian 
business men's proclamation continues, must be reformed 
and remodelled, if the State is to furnish effective co- 
operation in the economic development. Bureaucracy 
and centralisation of power are the worst evils. Admin- 
istrative functions must be made more elastic, more 
prompt and more suitable to the purpose for which they 
exist. Red tape must be cut. The present multiplicity 
of offices must be done away with ; officials must be made 
individually responsible. With fewer offices it will be 
possible to pay better salaries and to induce competent 
men to accept public office. 

It is the State's duty to help in spreading Italian mer- 
chandise on foreign markets and in finding new out- 
lets. An advertising campaign on a national basis should 
be prepared for this purpose, "to make known abroad the 
value of our energies and to elevate the prestige of the 
Italian name, which had fallen low in the long years of 
negligence in the past." Italian merchants and manufac- 
turers will undertake to do their part in this regard, but 
the Government must second their efforts actively and 
consistently. 

The immediate task is to keep factories built in war 
time busy and to keep labor employed. The great pub- 
lic works which the Government has already decided upon 
— the installation of water-power electric plants, as well 



254. AMERICA IN WORLD MARKETS 

as mining, industrial and agricultural development work, 
especially in Southern Italy — should be planned out in 
detail and materials should be provided for them, so that 
work may soon be begun. Work should at once be begun, 
also, for creating the great merchant navy which the 
Government is pledged to, and for the carrying out of 
the harbor improvements so much needed at many of 
the Italian ports. 

Scientific research in the interest of industrial and 
manufacturing enterprises, it is further recommended, 
should be set on foot by the Government, and a scheme of 
new banking methods and credit facilities worked out for 
the benefit of Italy's industries and export commerce. 
There is need also of the immediate formulation of a 
vast financial plan to determine the means not merely of 
paying the huge war bills, but also of providing for put- 
ting into execution the peace development work already 
planned. In this way there would be no sudden stop of 
activities, but a gradual transformation process which 
would prevent the nation from being stricken with a 
depression panic. 

Italy must undertake to take care of her soldiers. They 
must not be subjected to the temptation to emigrate. 
Work must be ready for them with the assurance of 
good returns for it to compensate them for the tremen- 
dous sacrifices endured for the country. Hereafter Ital- 
ian labor must be kept at home. Instead of an "emigra- 
tion of men," Italy must .arrange for an "emigration of 
products." 

Materials of all kinds will have to be sought abroad. 
From America must come the steel and iron and much 
of the construction material for the great public works 
that are planned, and these should be arranged for at 



ITALY 255 

once and provision made for a continuance of the coal, 
oil, grain and equipment supplies which had been con- 
tracted for as a war emergency. From America is ex- 
pected also the industrial machinery to equip the Italian 
factories for peace service, and provision should be made 
for it as far as possible in advance of the time of its 
need, so as to insure its receipt without wasteful delay. 

To this whole "programme," or outline of practical 
proposals for the advantage of Italy, the Italian capital- 
ists invite the co-operation of the entire nation without 
regard to party or politics. It is admittedly a programme 
which exalts the State and demands the "sacrifice of an 
excessive and dangerous individualism ,, such as the 
notions of democracy heretofore prevailing in Italy had 
fostered. "But this is not the hour," the proclamation 
says, "for illusions, for discussions, for criticisms. It is 
the hour for action, for deeds." The ground must be cut 
from under the feet of the Bolshevist agitators. 

It may be added, in connection with this declaration 
of the new era views and plans for action of Italy's mer- 
chants and manufacturers, that Italy is for America a 
foreign-market opportunity of a quite exceptional kind. 
Germany had dominated the market; Italy is now prac- 
tically making an appeal to this country to come in in 
substitution. 

"There is the most serious danger," a member of the 
Italian Commission to America has declared, "that the 
Germans will renew their grip on Italian commercial life. 
What are Italian merchants to do? They are in dire 
need of merchandise and there, practically at their door, 
are the Germans with, as we have reason to believe, large 
stocks of the very wares the Italians most need and have 
been accustomed to get from the Germans in the past, 



256 AMERICA IN WORLD MARKETS 

the Germans eager to dump them on the Italian market 
to get a footing once more, ready to sell cheap and with 
six months' or a year's credit. The Italians struggle 
against the temptation and keep their eyes fixed towards 
America. American manufacturers by taking prompt 
action can get the Italian market and hold it for them- 
selves. But it is imperative that they go about the busi- 
ness in the right way, that they reveal a disposition for 
mutual service and, above all, that they waste no time." 

A combination, under Government supervision, has 
been arranged between four of the principal commercial 
banking institutions — the Banca Commerciale Italiana, 
the Credito Italiano, the Banca Italiana di Sconto and 
the Banco di Roma. It is to continue for two years after 
the signing of peace. Agreements covering commercial 
credits, loans and accounts, loans in the public interest 
and the financing of national industrial undertakings have 
been reached by the combination. The banks are to make 
a common investigation of commercial conditions and 
needs, to co-operate in providing the largest possible 
measure of industrial and commercial self-sufficiency for 
Italy, to find new markets for Italian products, to co- 
ordinate the smaller banks and private banking institu- 
tions for the same general purpose, and to adopt the mosf 
liberal financial policy for the nation's benefit. 

These banks have established branches in the United 
States to assist in every way possible in developing trade 
and commerce between the two countries. 



CHAPTER V 



GERMANY 



Twofold Function of Ministry of Economics — An Export 
Trade Organisation Formed-^Bureau for Re-establish- 
ing German Prestige and Commerce Abroad — New 
Intensive Study of Foreign Countries With View to 
Trade — Expected Nationalisation of Many Industries 
— How Germans Expect to Retrieve Their Losses. 

Germany's elaborate plans for the after-war period 
have already been referred to in some detail. The Min- 
istry of Economics was established on October 21, 191 7, 
and was divided into two main sections, one dealing 
with economic questions, customs, tariffs, monopolies, 
syndicates, etc., and the other section dealing with social 
questions, such as unemployment, insurance, housing and 
the like. The Commission for Transition Economy has 
already been described. 

Germany's main concern was with the problem of 
securing raw materials — and chiefly the textile fibres, 
leather, rubber, oil and fats — for her industrial purposes 
after the war, and with shipping to handle her exports 
and imports. A monopoly of the importation of raw 
materials is said to be among the projects of the Ger- 
man authorities, and monopolies of other kinds, as on 
sugar, spirits, petroleum and insurance, are regarded as 
among future developments in Germany, and it is not 
improbable that buying, selling and manufacturing of the 

257 



258 AMERICA IN WORLD MARKETS 

important commodities and products will be kept under 
Government control, at least temporarily, for the 
economic benefit of the country. The industrial com- 
binations and concentrations which were forcibly 
brought about in Germany during the war are likely to 
be continued. 

A German export trade organisation, somewhat on 
the lines of the British Trade Corporation, has been or- 
ganised, it is said, in Germany with a capital of 25,000,- 
000 marks, to undertake the construction and operation 
of railroads, irrigation plants, harbors, electric plants, 
factories; to operate plantations and mines, and to form 
and participate in subsidiary concerns. Among the Ger- 
man firms announced as being represented on the Board 
of Directors are the North German Bank, the Dresdner 
Bank, the Hamburg-American Steamship Company, the 
Rheinish-Westphalian Coal Syndicate, Krupps, Siemens- 
Schuckert and others. 

In Berlin there has been established a central office 
"Fur Auslandsdienst," the purpose of which is to de- 
termine the means of re-establishing the prestige and the 
commerce of Germany abroad. 

The Germans are also planning the organisation of 
a superior training and education institution, "Fur Aus- 
landskunde," for the knowledge of foreign countries. 
This organisation is to be dependent on the universities 
and is to offer to the students the means of getting a 
complete and detailed knowledge of the countries where 
they might be called to exert their activities as diplomats, 
missionaries, professors, doctors or business men. The 
University of Bonn is to be the centre for the special 
study of the Latin and Latin- American countries. In 
that University, for instance, French, Italian, Spanish 



GERMANY 259 

and Roumanian will be studied to an exceptional extent, 
and geography, history, social and military organisation, 
the character, the tastes, the economic and intellectual 
needs of the Latin peoples will be made the object of 
profound study. In the same way other universities will 
deal with other ethnical or geographical zones of the 
world. The Germans seem to be far from having re- 
nounced their comprehensive method of economic con- 
quest. 

Germany, as a federation of "republics," will, it is ex- 
pected, undertake the nationalisation of many great in- 
dustries in the form of an enforced syndicalisation under 
government control. The new condition in this case 
would be but little different from that which prevailed 
during the war, when the concentration of German in- 
dustries was conceived not merely for military purposes, 
but also for more effective economic effort after the war. 

President Ebert announced that arrangements had 
been made for the combination and "socialistic opera- 
tion" of various branches of business that were to be 
handled as State monopolies. 

German leaders have been wasting little time discuss- 
ing the philosophy of economic laws or theorems of 
sociology. In their practical way they have been pound- 
ing home concrete facts. The war imposed heavy bur- 
dens on all the nations that took part in it. There is 
only one way to lighten the burden, to repair the waste, 
to make up the losses, to reduce the debt. Work! The 
thing can be done. Germany can turn defeat into vic- 
tory. She can make good what she lost; she can be- 
come great and powerful once more ; she can resume her 
former dominant position in world commerce. There is 
just one condition — work. Work that is untiring, reso- 



260 AMERICA IN WORLD MARKETS 

lute, systematic — improbus labor — work that is uncon- 
scionable, reckless, relentless, extravagantly energetic. 
All Germany, everybody in Germany, must work as they 
never worked before. And Germans can work. Work 
made them commercial world conquerors. Work will 
once more give them supremacy. 



CHAPTER VI 



FOREIGN TRADE SERVICE 



State Department Proposes Consular Increase — To 
Make Service Strictly American — New Economic Ex- 
perts — Better Pay for Consuls — Overwhelming Duties 
Imposed on Them — Foreign and Domestic Commerce 
Bureau to Expand — Valuable Services Which It Ren- 
ders — To Explore Foreign Areas. 

The State Department, on which the consular service 
depends, requested from Congress an increase of more 
than $1,000,000 in its 19 19-1920 appropriation for its 
foreign service programme. A considerable part of this 
sum is eventually for the development of the consular 
service. It is planned to increase the number of consuls 
by 2 5» to appoint 150 consuls of career and to create 
a new office, that of "economic expert." The economic 
experts, of whom it is proposed to have twenty-five, 
are to be men trained in business who can be sent to the 
various consular offices to study the situation, to relieve 
consuls-general, to gather information of interest to 
industry at home and such information also as will be 
of value to the country when it is negotiating commer- 
cial treaties and preparing tariffs. The twenty-five new 
consuls are destined to be sent for the most part to re- 
mote regions where ultimately they may be needed, where 
American ships may put in and where American trade 
may be established. 

261 



262 AMERICA IN WORLD MARKETS 

The 150 vice-consuls are mainly to replace existing 
consular agents. All these must be Americans. 

The war found American interests in out-of-the-way 
places often in the hands of non-Americans, consular 
agents, receiving no salary, remunerated only by fees 
commonly totalling less than $100 a year, men who cared 
nothing about the United States apart from the fees it 
made it possible for them to earn. Even in the future, 
although the purpose is to make the service as American 
as possible, it is considered unavoidable to continue to 
employ such foreign consular agents on the fee plan, in 
parts of Turkey and Russia ; but they will have no access 
to confidential matters and will know nothing of Ameri- 
can plans for trade expansion. It is also planned to in- 
crease the salaries of some of the classes of consuls, 
chiefly those of the $2,000 class, the most numerous of 
all. 

The consul's duties are of bewildering variety and 
extent. He is a notary, a dozen kinds of ship function- 
ary, in some places a judge, an arbiter of disputes, a 
purchasing agent, a direct representative of the State 
Department, an indirect representative of all the other 
Departments as well as of the hundred odd million 
people of the United States. During the war our con- 
suls were "The Government" abroad. They were en- 
trusted with making purchases for the Army and Navy ; 
$2,000 consuls were carrying through transactions in re- 
mote places involving many millions of dollars on mere 
brief cable orders from home. They handled the financ- 
ing of shipping for the United States Shipping Board 
and they conducted business of endless variety. The 
American consular service covered itself with glory dur- 
ing the war. 



FOREIGN TRADE SERVICE 263 

It is from the American consuls that the great body of 
general information on foreign business and on foreign 
markets seems to be expected. The consuls do send in a 
great deal of commercial information. But how could it 
be expected to be fresh, valuable or even correct? The 
consuls are over-worked and miserably underpaid. They 
cannot at their discretion run up expense accounts. 
Where are they going to get the live exclusive trade news 
that is to be of benefit at home ? They stick nobly to the 
service, but many of them are forced to resign out of 
sheer inability to keep body and soul together for them- 
selves and families on the wretchedly inadequate salaries 
they receive. They invariably can get better-paid posi- 
tions than the service offers them. It is clear that, under 
the present circumstances, American industry cannot 
count very much on the consular service in helping to 
solve the problem of establishing a foreign commerce. 

The branch of the Government which more directly and 
immediately represents the interests of American in*- 
dustry for the purposes of foreign commerce is the 
Bureau of Foreign and Domestic Commerce of the De- 
partment of Commerce. This Bureau has established 
for itself among business men throughout the country an 
exalted reputation for its admirable organisation and for 
the highly practical nature of the commercial service 
which it renders. This was testified to during the past 
year when the Bureau was called upon for aid by the 
Shipping Board, the War Trade Board, the War Indus- 
tries Board, when it assisted in the organisation of for- 
eign service for other branches of the Government; ad- 
vised on war-time legislation; purchased foreign raw 
materials for the Army and Navy; straightened out the 
war-time difficulties for many manufacturing concerns, 



264 AMERICA IN WORLD MARKETS 

and engaged in commercial education work in many parts 
of the country. 

Ahead of any institution of its kind in any other land, 
in fact accepted as the model for imitation by the other 
leading countries, the Bureau has been accomplishing this 
admirable achievement on an annual appropriation of 
around $500,000 — last fiscal year a little under that sum, 
this fiscal year a little over it. 

For the fiscal year 1920 the Bureau is now seeking an 
increase of over $800,000, or a total of $1,365,470. As 
a matter of fact it ought to have at least that much to 
spend in every single country important to the United 
States as a foreign market or as a competitor, and pro- 
portionate sums in the countries of minor importance. 
In that way it would be enabled to render to American 
industry a foreign service commensurate with the effi- 
ciency of its home organisation. 

The Bureau controls eleven commercial attaches — men 
with fixed domicile and an office force — in leading capi- 
tals. It plans to add on nine more, and to locate them 
in Canada, Italy, Spain, Greece, Moscow, Mexico, Cuba, 
Panama and Chile. It desires to increase its trade com- 
missioners — expert business investigators with a roving 
commission — from ten to twelve in Latin-America, from 
seven to fourteen in the Far East and from twenty to 
twenty-eight in other countries. Some of these it would 
establish in new fields whose trade possibilities have 
never been thoroughly studied — Colombia, Venezuela, 
Ecuador, Bolivia, Paraguay and many regions in the 
great stretch eastwards from Suez to the Philippines. 
The good that the twenty-six more men will do under 
the direction of such an organisation will undoubtedly 
be considerable, but until Congress grants to the Bureau, 



FOREIGN TRADE SERVICE 265 

not a small percentage increase in its field force, but a 
multiplying of that force tenfold and twentyfold, the 
manufacturers of America must understand that on their 
own shoulders lies the burden of performing certain very 
important duties in the opening up of foreign markets 
for the individual industries. 

With men competent to speak on the question of orig- 
inating foreign trade, I have discussed practical ways of 
going about the matter and have found rather indefinite 
and widely varying opinions. One of them is the Execu- 
tive Secretary of a great association of merchants. It 
is his judgment that not until the American manufac- 
turer has reached the state of mind where he can con- 
ceive a foreign market, not as a dumping ground for his 
surplus, but as a primary market in the truest sense, 
will it be wise for him to take another step towards 
getting into that market. 

"When his mind has reacted to this extent," he added, 
"he must begin to study the foreign market, as he would 
study the home market, to determine what class, char- 
acter and styles of goods that market demands and will 
purchase. Until he devotes the same business acumen 
and the same business skill to penetrating the foreign 
market, as he does with regard to the home market, he 
will not open the foreign market to himself, or, having 
opened it, he will not hold it. He must learn not only 
what the foreigners want, but how they want it — details 
on payments, on methods of packing and shipping, and 
so on." 

With regard to the way in which the American manu- 
facturer is to seek information about markets generally, 
and about the one in particular which he may be plan- 
ning to invade, this authority declares that the manu- 



266 AMERICA IN WORLD MARKETS 

facturer must proceed in the matter in a strictly busi- 
nesslike way. "He cannot expect his Government to do 
his business for him. Where a firm is sufficiently strong 
to go into the field with its own agents and at its own 
expense, that I believe is the better way to do it. But 
in the case of the smaller manufacturers, or of the great 
manufacturers projecting only a small foreign business, 
I should think that the export commission houses would 
supply the deficiency. They might be looked to for in- 
formation and details regarding the countries with which 
in a special way they keep in communication. In this 
way the manufacturer should be able to learn important 
facts regarding the foreigner's point of view, his method 
of doing business and his special requirements, so that 
the manufacturer may adapt his sales machinery in con- 
formity with same." 

Another authority, the President of a club of men 
engaged in merchandising and distributing, one with per- 
sonal experience in the field, had this to say : "What I 
would advise is the formation by American manufac- 
turers of foreign sales organisations. I would, for in- 
stance, gather into one club fifteen or twenty non-com- 
peting industries that were desirous, not of experiment- 
ing, but of actually going ahead and doing business in 
foreign countries. Co-operative selling plans would be 
worked out; salesmen would be taught the various lines 
and would be trained in collecting practical market in- 
formation — not from books or reports, but on the 
ground. The policy would be to select the right men, 
pay them the right price and send them out to get the 
business. The central office, equipped with all the com- 
mercial information, prices, deliveries and the like, would 
also be the co-operative clearing house. Expenses would 



FOREIGN TRADE SERVICE 267 

be divided up, thus minimising this usually most formid- 
able cost item of foreign salesmanship." 

Another, who has directed for a great manufacturing 
corporation a selling organisation distributed around the 
globe, is not in entire accord with the idea of counting 
on export commission houses for the establishment of 
a foreign market, as such firms, in his^view, have their 
own special and most valuable function, but one which 
imposes on them the obligation of being in touch with 
the broadest sort of a field. Accordingly they could not 
be expected to specialise in the way that would be of 
practical benefit to manufacturers individually. As for 
the export club idea, he was inclined to think it might 
work out more beneficially if it included only manufac- 
turers who were competitors, instead of being non-com- 
petitors. A group of competitors could agree on the way 
to ship goods, the way to finance shipments, on credits 
and even on prices. "I can imagine," he said, "that a 
club of that kind might be a boon to the manufacturers 
composing it and an economic benefit to American indus- 
try as a whole." 

There will be demand from the United States on a 
vast scale for materials and machinery to reconstitute the 
war-stricken areas and the industries in foreign coun- 
tries stunted by the great struggle. Producers in these 
lines will readily get in touch with their markets through 
the Department of Commerce or through the foreign 
commissions already established in this country. But 
the export business that is of most importance to Amer- 
ica, the business that would steadily and continuously 
serve to convert into actual values the enormous poten- 
tial wealth represented in America's great capacity for 



268 AMERICA IN WORLD MARKETS 

production, is not of the kind that comes knocking at the 
producer's door. 

Obviously hereafter there will be no royal road to for- 
eign trade. Much effort will have to be spent to develop 
it. Organisation will be needed and it is clear that the 
manufacturers of the country in general are without ex- 
act data regarding the method of procedure. The mat- 
ter is one well worthy of the attention of the congress 
of business and it is not to be doubted that that congress 
could work out a practicable course for the guidance of 
the manufacturers. 



CHAPTER VII 

America's representation abroad 

Demand Abroad for Reform of Diplomacy — Bureau- 
cratic Methods to Be Modernised — Economic Rather 
than Political Representation Desired — Proposed Di- 
rective Council at Home — Specialists to Control Its 
Sub-Divisions — The Tests for Foreign Representa- 
tives. 

There is a feeling among the nations that the old way 
of representation of a country in foreign lands is no 
longer adequate to modern times. There is consequently 
a fairly general demand for what is called the "reform 
of diplomacy/' and what in reality means the reform of 
foreign service generally, including that of the Depart- 
ment of Foreign Affairs as well as its representatives, 
ambassadors, ministers and consuls and special agents 
in foreign countries. 

The old diplomacy was found wanting when the war 
began and the prolongation of the war has been by many 
attributed to the blunders of diplomacy. With the war 
ended, it is felt that there must be no going back to the 
old way, that hereafter representation of a country 
should be based even more on economic than on political 
considerations. Commissions in several countries are at 
present considering the method of reforming diplomacy 
and foreign service, some of them quietly and others 
more or less openly. 

269 



270 AMERICA IN WORLD MARKETS 

In Italy a commission with several subcommittees has 
been examining the problems of reform of State admin- 
istration, of simplification of bureaucratic service and of 
better representation abroad. The nation's representa- 
tives abroad are expected to be in the future the militant 
tuiC^s for fighting the battles of the nation's expansion, 
and consequently representatives in the League of Na- 
tions, in embassies and in consulates, it is laid down as 
a general principle, must be men chosen, not because of 
their mental and educational attainments, their capacity 
for passing examinations, or their social standing, but 
because in the active world they have manifested notable 
qualities of leadership and general capacity for promot- 
ing their own country's interest in foreign lands. 

It is needless to refer to the weak points of foreign 
representation as it has existed in the past, the fact that 
ambassadors often were selected for their social graces 
and for their wealth and that between them and the func- 
tionaries who filled the consular offices there existed a 
wide gulf which even the interests of the country they 
were representing did not always serve to bridge. There 
has been, for instance, in Italy an established law that 
an ambassador must have a private income of not less 
than $1,600, that there must be recognised interrelation- 
ship between the diplomatic and the consular services and 
that in fact there must be a passage annually of at least 
three from the consular service to the diplomatic service 
and three from the diplomatic service to the consular 
service. Laws have been passed, from Crispi's day to 
our own, regulating these questions, but often they have 
remained a dead letter. Consuls sometimes have passed 
up into the Italian diplomatic service, but in spite of the 
law there are no records of any movements from the 



AMERICA'S REPRESENTATION ABROAD 271 

diplomatic service down to the consular service. It is 
felt quite generally that a radical and far-reaching re- 
form that will wipe out such distinctions between func- 
tionaries must be effected by every nation in its own in- 
terest if it is to avoid the likelihood of being involved 
in complications and confronted with serious interna- 
tional problems without anything like fair warning. 

As a matter of fact, public opinion is now dealing with 
questions of this kind and public opinion will in the fu- 
ture make it more difficult than it has been in the past for 
nations suddenly to find themselves at war without the 
great mass of the public knowing the why or the where- 
fore. It is realised also that for the individual country 
the national policy in commerce, finance, economics and 
public information, as far as they regard foreign rela- 
tions, should be unified with a view also of adding to 
their development and to their expansion. 

The vital thing hereafter will be the foreign relations 
of economics, of industry and trade. Diplomats, con- 
suls, commercial attaches, will have to be men trained 
for united work in furthering national economics abroad. 
Their functions should be not merely academic — study- 
ing, gathering information, reporting — but active work, 
a display of initiative, of creative brain power in the 
competitive struggle that faces all the nations in the 
future. 

Behind them at home should be a directive Council of 
statesmen and experts, with subdivisions dealing with 
the various branches — commerce, finance, transportation, 
and with the national, political and economic institutions 
of the country, and with consideration being given also 
to the representation of public opinion and of initiative 
deriving from the public. Such a Council should be en- 



m% AMERICA IN WORLD MARKETS 

dowed with authority to act and should be permanently 
and uninterruptedly in session, watching developments, 
formulating plans and putting them into execution, with 
business leaders of the country in the important directive 
and consultative positions, and with a specialised per- 
sonnel always available for special missions abroad. 

In a time like this all the functions of government 
should be tingling with life and vibrating with energy, 
ready and eager to deal in effective manner with the 
new economic conditions which it is so important for the 
nation to confront understanding^ and to shape intel- 
ligently for its own welfare. 

Many ways are suggested for selecting the represen- 
tatives of the country for foreign relations. They do 
not exclude the method of examinations with the prin- 
ciple of selection. They imply the conferring of greater 
prestige on those who are to represent the country and 
the encouraging in them of the willingness to assume 
risks, to accept responsibility, to show initiative, and to 
be always ready and active, eager to study new things 
and constantly training themselves. Men with these 
qualifications are the only men on whom a country can 
reasonably confer plenipotentiary powers. The diplo- 
matic career must be democratised, though it is impor- 
tant that it be made more and more "aristocratic" as far 
as practical business and cultural talent are concerned — 
that is, the "best" are the men to whom the fortunes of 
the country abroad may be safely entrusted. Examina- 
tions do not prove such men; they prove themselves on 
the firing line. The power of selection should reside in 
the above suggested Council, in which public opinion is 
accorded representation. 

Geographical zones might be marked out and special 



AMERICA'S REPRESENTATION ABROAD 273 

sub-divisions of the Council might deal with them in a 
detailed way. The experts within a special zone should 
be available for service at home in the Council or for 
service within the zone regarding which they are experts. 
The offices in foreign countries established by the nation, 
chancelleries or consulates or commercial bureaus, should 
be special institutions properly organised to relieve the 
diplomat, the consul, the commercial attache, the trade 
commissioner from mere routine office duties which he 
now has to perform and should be stable bureaus which 
do not change with the incumbent, so that the latter can 
devote his time and energy to his important political- 
economic functions. 

The war has shown how to find the fitting men for the 
great practical services. They can be found also for rep- 
resentation of the country abroad and leading business 
men can be induced to participate in such representation 
if the conditions are arranged so that proper treatment 
is meted out to them, and so that consideration is taken 
of the eminence of their status and of their right to pro- 
tection from unjust attack. 



CHAPTER VIII 



NATIONAL PUBLICITY 



A Form of Propaganda Being Widely Adopted — For- 
eign Offices Generally Had a Publicity Bureau — How 
Austria Profited by Hers — German Business Men 
Originated New Scheme — Economic and Political 
Publicity — Important That Work Hereafter Be Above- 
Board — Publicity to Promote Industrial Peace. 

The four years of war have brought an interesting 
evolution in the views of statesmen regarding the politi- 
cal and economic power of publicity. The Germans en- 
tered the war with their "propaganda" full-fledged ; their 
preparedness in this regard had been complete. When 
men of broad judgment urged that the Allies in their 
great and intensive work of organising for war, after 
war had begun, make immediate provision also for the 
proper representation of their cause and of their side of 
the variety of questions constantly springing up, there 
were other voices which deprecated the idea. But as 
time went on the Allies saw that publicity was essential 
as a political and economic need of our time. To neglect 
it was to take serious risks. The Germans were work- 
ing their propaganda not merely to influence neutrals 
and obtain their support, but also to split the Allies, to 
interfere with their commerce arid to affect it in the 
future. It reached a point when the most urgent need 
was for publicity among the Allies themselves. 

France, early in 191 7, created the office of Minister 

274 



NATIONAL PUBLICITY &75 

of Propaganda, but very quickly changed the title to 
Minister of Inter-Allied Relations. The incumbent vis- 
ited the United States and other countries, in fur- 
therance of the duties of this office. He served as what 
we might term a "liaison agent" on behalf of France 
with the countries associated with her in the war. Later 
on England appointed a Minister of Propaganda in the 
person of Lord Northcliffe, who resigned a few days 
after the armistice was concluded. In the meantime 
France and England had been coming around to the vital 
importance of publicity for their cause. Lord North- 
cliffe, considered a genius of publicity, was sent to the 
United States as England's chief commissioner for war 
work. A distinguished French newspaper man, Mr. 
Andre Tardieu, came as French High Commissioner and 
the editor of Le Matin, Mr. Stephane Lausanne, was 
made a member of the Commission. Italy appointed 
Signor Felice Ferrero, a representative m New York 
of leading publications in Italy and a brother of the 
famous historian, as head of a bureau of Italian propa- 
ganda in the United States. Similar appointments were 
made in countries of the European Allies and neutrals. 

In neutral lands especially there was keen competi- 
tive rivalry, for the Teutons were also busy and their 
appreciation of propaganda and of publicity was not of 
recent date. Then there came a time, marking an epoch 
in the development of the whole matter, when it was 
realised that the economic interests of a country at war 
had no less urgent need of publicity than its political 
and military interests, and that experienced business men 
were best qualified to determine the subject matter of 
publicity abroad, while to trained publicists might be en- 
trusted the form in which it was to be set forth. As the 



276 AMERICA IN WORLD MARKETS 

end of hostilities approached, and the broad lines of 
after-war policy were being laid in the chief European 
countries, there was manifested a general recognition 
of the established importance of national publicity. 
Whether elevated to the grade of a permanent office or 
not, publicity, it is forecast, will be a conspicuous gov- 
ernment function in all the leading countries. 

The United States, differing radically from its asso- 
ciates in the war in the matter of economic status and of 
economic needs, has not had, for this and other reasons, 
the same impulsion to conform promptly to the new 
methods and practices taken up by the other nations at 
war. This country, however, has sooner or later adopted 
most of the important innovations that the war has made 
politically or economically desirable and students of poli- 
tics are aware of the enormously increased prestige of 
publicity as the promoter and safeguard of democracy, 
so that there is no reason to doubt the opinion of those 
close to the administration who expect the establishment 
in this country also of an important form of national 
publicity. On this account it may be interesting to ex- 
amine the phases of the world boom of publicity and to 
consider what are likely to be its enduring features and 
what its prospective effects. What also, it will be inter- 
esting to ask, is to be the proportionate share of the 
Government and of the private person in the national 
publicity scheme that may ulteriorly be put into execu- 
tion? 

Austria has been the shining example of the country 
that has turned publicity to marvellous political advan- 
tage. Almost thirty years ago the Foreign Office in 
Vienna took over the direction of a Correspondence Bu- 
reau, which, previously, in the hands of private parties, 



NATIONAL PUBLICITY 277 

had been a purveyor of news of a more or less official 
character. Whoever was responsible for its organisation 
and management under the new auspices deserves a trib- 
ute of admiration for publicity ability of a very high 
order. 

Some expert investigator may one day figure out 
for us the influence on international politics, on the des- 
tinies of nations, which in those three decades that Cor- 
respondence Bureau wielded, an influence more potent 
than that of all the Skoda guns Austria ever manufac- 
tured. In the meantime it may be stated in general terms 
that the influence was enormous. Let us judge it by 
the results. Even almost up to its collapse we all had 
a mental picture of the Empire of Austria-Hungary as 
a great prosperous military power with a government 
that was tolerant, magnanimous, even chivalrous, ruling 
a people gay and laughter-loving, effervescent and sen- 
suous as the Viennese operetta, and second only to the 
French in their successful cultivation of the arts and 
fashions. If any foreign nation had a squabble with 
Austria we were more likely than not to assume that 
Austria's side of the dispute was the side of courtesy 
and sweet reasonableness. And what did we know of 
the Czecho-Slovaks, of the Jugo-Slavs, of the Serbians? 
If we were interested in them at all, we understood that 
they were a bad lot, when they were not actually un- 
civilised, illiterate boors of inferior mentality and of 
dangerous instincts. Vienna's Foreign Office publicity 
managers took care that the low record of these peoples 
should be available to the world. And these peoples, 
whom we now suddenly know for their military quali- 
ties — Serbia's marvellous war record will be an imper- 
ishable monument to her, while the knight-errant achieve- 



278 AMERICA IN WORLD MARKETS 

ments of the Czechoslovaks in Russia have been one of 
the glorious events of the war — and whom we now ap- 
preciate for their steadfastness through the centuries to 
their ideals of freedom and of justice, had writhed un- 
der the torture of misrepresentation, for the world was 
deaf to them, hearing only one side of the case and con- 
sidering its setting forth as conclusive. Italy raged for 
years over this Austrian Correspondence Bureau. Its 
methods were mild and insinuating, rather than blunt and 
aggressive. It kept the world abroad saturated with er- 
roneous and derogatory opinions regarding Italy and the 
Italian people. In the language of courtesy and moder- 
ation it issued the most damning statements about Italy's 
territorial aspirations and about the character of that 
country's leading men. Italian publicists made furious 
denials, but somehow were unheard. Positive statements 
have more news value and secure more attention than 
the subsequent denials of them. During the war the Vi- 
enna Correspondence Bureau outdid all its previous per- 
formances, issuing a steady flood of its moderately- 
phrased propaganda, insidiously aiming to sap the morale 
of the fighting forces on the other side, and at times help- 
ing to do so in certain spots with consequences perilous 
indeed for the Allied cause. 

The German methods of war propaganda are too well 
known to justify any description of them here. They 
were carried too far and a reaction occurred. 

The Hamburg magnates, men like Herr Huldermann 
of the Hamburg-American line, and the late Albert Bal- 
lin, demanded that the German propaganda be taken out 
of the hands of the military authorities and entrusted to 
the business men who had experience with foreign coun- 
tries, knew the modes of thought and the ideals of other 



NATIONAL PUBLICITY 279 

peoples and who had proved by experience that they un- 
derstood how to make the most desirable kind of an im- 
pression. 

Two publicity organisations had been created in Ger- 
many early in 1914 ostensibly for the purpose of adver- 
tising Germany's industry, upholding her prestige and 
gathering information for the benefit of her foreign 
commerce. The plans outlined struck the British Am- 
bassador in Berlin as so ominous that he formally warned 
his Government regarding the organisations. The Krupp 
Company, Siemens- Schuckert, the German General Elec- 
tricity Company, the Deutsche Bank, the Hamburg- 
American and the North German Lloyd Companies were 
among the big concerns composing the "syndikat" rep- 
resentative of Germany's industry and commerce, which 
paid in $125,000, two-thirds of the capital stock of these 
publicity enterprises. The German Government sub- 
scribed the remaining third and obtained one-third rep- 
resentation in the management. The supreme direction 
was vested in a committee of three — a Krupp director, 
a Deutsche Bank director and a representative of the 
Foreign Office — and under them an executive council 
was to guide the work of influencing the press at home 
and abroad and of directing the secret agents of the 
Syndikat scattered throughout the world. But for va- 
rious reasons, including apparent jealousy on the part 
of certain export publications and the leaking out of its 
secrets, it had not got down to work when the war be- 
gan. Later it was brought out for actual war service. 
This was about the time the Allies became aware of the 
seriousness of the "defeatist" campaign that was planned 
to be waged in France and Italy, when officials in the 



880 AMERICA IN WORLD MARKETS 

United States had unearthed the evidence that led to 
the execution of Bolo Pasha. 

The big business firms of Germany which before the 
war had set such store on the great export monthly pub- 
lications — such as the Deutsche Export Revue, for all 
kinds of German trade, and others such as the Chemiker 
Export Zeitung, for special industries — and on the week- 
ly periodicals and special editions of German commercial 
newspapers for foreign readers in their own language, 
now demanded that these media be again made the prin- 
cipal channels for pouring into other countries the flood 
of information best calculated to be of benefit to Ger- 
many. German publicity in the last phase of the war 
was getting back into the hands of business men, ap- 
parently without too much interference by the govern- 
ing authorities. 

The lesson which the war has taught the nations re- 
garding the need and the uses of publicity is not going 
to be unlearned. Some observers see an indication that 
a nation's publicity is more and more being regarded as 
the affair chiefly of the nation's business men. 

There are two chief classes of publicity which a great 
nation's interests demand in our day — political publicity 
and economic publicity. The former kind, of course, is 
nothing new, but is now considered as calling for new 
methods of exposition. Most of the great powers have 
long had in their Foreign Office a section of publicity, 
a thing of secrecy, the true character of which was usu- 
ally veiled under a cryptic name. It is now generally felt 
that political publicity is too vitally important to a coun- 
try to be kept hidden as an obscure function of the de- 
partment of foreign affairs, that it should be out in the 
open, an honored office conducted by men of eminent 



NATIONAL PUBLICITY 281 

attainments and of experience in international affairs. 
A branch of this form of publicity might be devoted to 
domestic service, to exposing trusts and combinations or 
corporations or individuals that might be indulging in 
noxious commercial practices and for other purposes. 

In Great Britain a domestic form of national publicity 
has been proposed for the purpose of spreading a knowl- 
edge of the fundamental principles of economic laws, of 
acquainting the whole people with the exact facts regard- 
ing industrial questions and conditions, of impressing on 
them the inter dependency of all classes in the commu- 
nity and of intensifying patriotic sentiment. This 
publicity is to be coupled with an educational campaign 
by organisations that cannot be suspected of ulterior mo- 
tives such as are commonly ascribed to politicians. The 
State can no longer stand aloof from industrial disputes 
which waste national resources and may bleed the na- 
tion white. Strife between the parties to industry must 
henceforth be regarded as a dangerous and insidious 
form of civil war putting the nation's prosperity, as well 
as its international standing, in grave peril. Frank 
publicity is regarded as among the most effective means 
of warding off the danger to the nation. 

A nation's economic publicity, on the other hand, is 
legitimately considered the belonging of its industry and 
commerce. There is a divergence of views, and there 
may be a divergence in practice among the various na- 
tions, as to the uniting or the keeping apart of the two 
forms of publicity, but there can be no doubt that a 
special, distinct and honorable establishment will be 
instituted in every leading country for the propagating 
abroad of accurate information in its political and diplo- 
matic interests, and that, either directly connected there- 



283 AMERICA IN WORLD MARKETS 

with or as a separate establishment, there will be insti- 
tuted an important organisation of publicity in the inter- 
est of the general economic life and well-being of the 
particular country. 



CHAPTER IX 

America's need for foreign trade 

Adventitious War Trade Developed Production Capac- 
ity — Our Normal Market Outgrown — New Outlets 
Needed— -Latin-America Generally Counted On — South 
Africa and Australia — America Practically Pledged 
Not to Usurp Foreign Trade of Allies. 

During the war we have had a foreign trade such as 
no nation ever had before. A total of $9,000,000,000 in 
each of the last two years of the war; a balance in our 
favor of $3,000,000,000 in each of the last three years; 
in payment, gold that puts us in possession of the bulk 
of the world's visible supply and securities and services 
of great money value. 

The adventitious trade that war created for us will 
continue in a diminishing way, for a time after the war. 
But our enormously increased capacity for production, 
far in advance of our own normal consumption, cannot 
be allowed to shrivel up. In the present condition of the 
world upheaval, depression in America might well be 
disastrous. An outlet must be found for our increased 
capacity for production. And so we look for foreign 
markets. 

It is towards Latin- America that the eyes of American 
business men generally are turned when they think of 
foreign trade which may promise to be remunerative for 
them and devoid of the complications in the way of 

283 



284 AMERICA IN WORLD MARKETS 

credits, of restricted profits, of obligation to buy in com- 
pensation for the privilege of selling, which they con- 
ceive as implied in trade relations with the nations of 
Europe which have recently been at war and which con- 
sider that they have a claim on the co-operation of Amer- 
ica in re-establishing their war-affected commercial 
status. 

"It has been the policy of this nation," said a resolu- 
tion adopted at the Atlantic City business congress, "to 
cultivate relations of close sympathy with the nations of 
the Western hemisphere as expressed in the Monroe 
Doctrine. We believe that these relations should be sup- 
plemented and strengthened by a vigorous development 
of our commercial and financial associations with our 
neighbors of North and South America." 

South America, with its tremendous natural resources, 
is an open field for endless development in which Amer- 
ican business can co-operate and can share in the rich 
returns. Americans are practically pledged not to usurp 
the foreign trade of their late co-belligerents by any un- 
ethical methods. Germany's trade in South America, 
however, is a legitimate object of competition. 

The German never conceived his mission as involving 
the conferring of a boon on those through whom he 
profited. It was no part of his task to help in building 
up South American countries for the benefit of those 
countries. Englishmen put their money in South Amer- 
ican railroads, Frenchmen in engineering and construc- 
tion works, Americans in mines. The German was there 
to profit by other peoples' risks. He sold goods, bought 
only what he needed or could resell, had banks through 
which to loan money at usurious rates for his own benefit 
on the properties and values created by the enterprise 



AMERICA'S NEED FOR FOREIGN TRADE 285 

and energy of others. The German did not give and 
take. He took; greedily, remorselessly, with scientific 
accuracy. It would be a godsend to South America if 
Americans replaced the Germans, installing the methods 
of co-operation and reciprocal service in place of the one- 
sided grasping methods of the German. Germany had 
her chance and failed. The United States can go in 
and help to make South America great. 

South Africa is another fair field of great promise, 
with an area of one and one-third million square miles 
and a population of 10,000,000. Germany used to sell 
$20,000,000 of wares there annually before the war. 
South Africa's imports are around $200,000,000, Great 
Britain supplying about three- fourths of the total and the 
United States about one-seventh. There is a fine legiti- 
mate fair-play opportunity for Americans who can help 
supply the means for South Africa to produce raw ma- 
terials, to develop railroads, to install industries and to 
grow prosperous commercially. Americans in fact are 
in a privileged position for this purpose, if only ship- 
ping facilities become available. 

Australia furnishes somewhat similar opportunities, 
shipping raw materials, chiefly wool, wheat and meat, and 
importing manufactured articles, clothes, machinery, 
tools, automobiles, and the like. Australia in 191 7 
imported $65,000,000 of goods for a population of 
5,000,000, being thus a better import market by nearly 
fifteen per cent than Brazil, with almost five times as 
many inhabitants. The Australian market will call in 
a particular way for reciprocal treatment in trade rela- 
tions. 

The opportunities for Americans to establish foreign 
trade will be many and alluring, but it should be realised 



286 AMERICA IN WORLD MARKETS 

that in order to grasp them in the best way and to build 
up solid and permanent foreign outlets on which the in- 
dustries at home can safely rely for steady flourishing 
commodities there must be secured the co-operation of 
all the economic forces of the country, and in particular 
the banking, manufacturing, merchandising and trans- 
portation systems. 

"We do not seek to extend the foreign commerce of 
the United States at the expense of those nations with 
whom we have fought shoulder to shoulder for human 
happiness," said George Edmund Smith, President of 
the American Manufacturers' Export Association ; "we 
desire the United States to be prosperous, but prosperous 
as part of a prosperous world. We desire to increase 
America's exports, but in doing this we recognise that 
any permanent expansion is entirely dependent upon 
the commercial progress of the nations which buy our 
products. We make no secret plans for the exploitation 
of other peoples, but take counsel together in public upon 
the best methods for meeting the world's demands for 
those things which the United States, because of its nat- 
ural aptitudes, can make better or cheaper than any other 
country. When, therefore, we speak of foreign trade in 
this connection, we speak of it as international trade, as 
an interchange of commodities and wealth among all the 
countries of the world which will make for human prog- 
ress." 



CHAPTER X 

AMERICAN SHIPS AVAILABLE FOR COMMERCE 

Widely Varying Statements Regarding Tonnage— Erro- 
neous Impressions Widespread — Mr. Schwab's Figures 
— Forecasts Will Not Be Realised — Our Effective 
Ocean-Going Tonnage — How World's Shipping Has 
Deteriorated — Wear and Tear of War and Inferior 
Construction — Falling Off in Construction. 

A vital question for American manufacturers con- 
templating the development of foreign trade is that re- 
garding shipping. To what extent may they rely upon 
American shipping to carry their goods? 

The volume of American shipping that will be avail- 
able has been the subject of many statements of widely 
varying nature. 

Mr. Charles M. Schwab has stated that the United 
States Government had at that time (first week of 
December) under its control between 6,000,000 and 
8,000,000 tons of merchant shipping and that the ship- 
building facilities of the United States would be able to 
produce from 8,000,000 to 10,000,000 tons of merchant 
shipping in 191 9. 

The impression gained by many of Mr. Schwab's 
hearers was that this country is likely to have from 
14,000,000 to 18,000,000 tons of merchant shipping 
by the beginning of the year 1920. And yet in reality 
this is so utterly unlikely that it would be a serious error 



288 AMERICA IN WORLD MARKETS 

for American industry to lay its plans with any such ex- 
pectation regarding America's prospective tonnage as 
any part of their foundation. 

It was pleasant in war time to get the good news re- 
garding our great shipping programme. The work ac- 
complished was a proud achievement for the nation. The 
plans ahead were on a scale that justified the highest 
expectations. But the end of the war meant a great 
change in the merchant shipping programme. That pro- 
gramme was a war measure. The United States Gov- 
ernment was in the business of building cargo ships at 
the fastest possible pace merely because it was an ur- 
gently necessary step in the prosecution of the war. 

What the Government would do in the matter after 
the war was quite another question. Those in a posi- 
tion to conjecture, with the greatest probability of ac- 
curacy, on the subject do not for a moment believe that 
Congress will authorise the continuance of merchant 
shipbuilding with public funds on any such progressive 
scale as in the past year. Congress may be impressed 
by statements frequently heard that if all the nations car- 
ried out their shipbuilding projects and programmes the 
world within a very few years would have an undesirable 
excess of tonnage. At any rate the slackening up in the 
months following the signing of the armistice is taken by 
many as an indication that the peak of production is 
already behind us. 

This does not mean that the figures and announcements 
of Mr. Schwab and others who can speak authoritatively 
are being called in question. What is intended to be con- 
veyed is that the impression gained in American business 
circles, to the effect that this country at an early date 



AMERICA'S MERCHANT SHIPPING 289 

is going to be provided with a great volume of merchant 
shipping, is far from accurate. 

Mr. Schwab in addressing a gathering of American 
business men probably assumed that they grasped his 
facts in the terms in which he had conceived them and 
had for many months dealt with them, as Director-Gen- 
eral of the Emergency Fleet Corporation. His calcula- 
tions were in accordance with the methods of the United 
States Shipping Board. The Board, it should be known, 
expresses tonnage in dead-weight tons. 

The reason for its departing from the general rule of 
figuring in gross tons is that it dealt mainly with cargo 
boats and sought the expression that would most closely 
indicate bulk tonnage capacity,. Gross tonnage, roughly 
figuring, is two-thirds of dead-weight tonnage. The 
Board considers only ships of 1,000 gross tons and up- 
wards. Mr. Schwab's figures then would indicate that 
the United States Shipping Board has in its control from 
4,000,000 to 5,333,000 gross tons of merchant ships of 
at least 1,000 tons. But not all of these are American 
ships, for they include ships taken over, ships comman- 
deered while under construction for other countries and 
chartered ships of foreign registry. 

Tonnage figures are apt to be tricky and misleading 
and the round numbers one sees quoted must be exam- 
ined for what they imply or what they omit. So many 
are the points to be taken into account that it is only with 
great care, and with many provisos, that figures can be 
set forth regarding merchant marine tonnage to convey 
the broad general information of which every American 
concerned in the development of the country's trade and 
commerce should be in possession. The facts and figures 
here given have been checked at the Bureau of Naviga- 



290 AMERICA IN WORLD MARKETS 

tion of the Department of Commerce in personal discus- 
sion with Commissioner Chamberlain, chief of the Bu- 
reau, one of the recognised world authorities on the sub- 
ject. 

The total gross tonnage of United States merchant 
shipping at the end of the year 1918 is placed at 
1 1,400,000 tons. This includes all kinds of craft, ocean- 
going, coastwise, vessels that navigate harbors and 
rivers and even canals, all boats large and small that 
need Custom House documents to engage in trade. 

The effective ocean-going tonnage of steamships of 
1,000 gross tons and upwards of American registry and 
ownership was in round figures 5,000,000 gross tons 
on January 1, 1919. It was declared that the total was 
not 50,000 tons out of the way on either side in this cal- 
culation, the variation to be taken into account being the 
exact amount of the new construction for the United 
States Shipping Board to be delivered or to be officially 
numbered at that time. To this figure should be added 
500,000 tons of sea-going sailing vessels of 1,000 tons 
and up, including coal barges, which constitute an im- 
portant item in the total. The United States thus had 
less than 5,500,000 tons of ocean-going shipping capable 
of general service in foreign trade. Nor is this all 
Without entering into the question of the obligation of 
utilising American shipping in the supplying and in the 
repatriation of the American Army abroad, in the fur- 
nishing of assistance to war-afflicted countries and in the 
carrying of materials to devastated lands, there are other 
considerations which affect the availability of American 
merchant shipping for foreign commerce. 

The world's gross tonnage before the war, according 
to Llo3'd's figures, was 49,089,552 tons. The best au- 



AMERICA'S MERCHANT SHIPPING 291 

thorities estimate the war loss of merchant tonnage in 
round figures at 10,000,000 tons. Besides this there is 
to be considered the normal annual loss of about 
1,000,000 tons. New construction only partly made up 
the tonnage figures, so that at the end of 19 18 it was cal- 
culated the world's gross tonnage was 44,500,000. A 
very important point that has not heretofore been con- 
sidered is that this 44,500,000 tons of to-day does not 
by any means correspond with 44,500,000 tons of the 
total 49,000,000 of approximately five years ago. As a 
body of tonnage it is a long way inferior, and if the in- 
feriority could be expressed in exact percentage it would 
most probably show that the world is very much poorer 
in merchant shipping than it was before Germany sprung 
the war of devastation on the world. 

The wear and tear on ships in those years has been so 
tremendous that it may be said that they are no longer 
the same ships. Never were ships worked so hard be- 
fore; never did ships get so little consideration or so 
little chance for repair and for recuperation. Cases of 
ships, during this period, falling apart and foundering 
in a calm sea have been many ; cases of exploding boilers 
and of serious engine trouble have been innumerable. 
A considerable percentage of the ships counted in this 
figure of world's gross tonnage would in normal times 
be regarded as fit only for the junk heap. 

Another important fact to be considered in this con- 
nection is that the new construction of to-day is not up 
to the grade of ship construction before the war. The 
average of the new ship is below that of the new ship 
of other days. This does not mean that there are not 
exceptions, that the United States has not been turning 
out fine ships. But every manufacturer will quickly 



292 AMERICA IN WORLD MARKETS 

grasp the fact that in shipbuilding, as in all other war 
work, the demand has been for haste, for the urgent de- 
livery of a finished article that will serve, that in the 
hurry the refinement of workmanship and of finish could 
not be insisted on, that the high-grade materials went 
into the weapons of the battlefield and were not avail- 
able for ordinary construction. 

Before the war our shipbuilding vvas relatively trivial. 
In 1 914 it amounted to little more than 300,000 gross 
tons. The following year it fell below a quarter of a 
million tons. Production for the United States Ship- 
ping Board began to be appreciable only after August, 
19 1 7. Slightly over 200,000 gross tons was delivered 
to the Board in the last four months of 191 7 and ap- 
proximately 2,000,000 gross tons in the entire year 19 18. 
These figures include thirteen ships of about 70,000 gross 
tons built by the Japanese. 

Mr. E. N. Hurley, chairman of the Shipping Board, 
expected this country to have something more than 13,- 
000,000 gross tons of ocean-going shipping in 1921. The 
country was getting into its stride in shipbuilding when 
the war ended. Then there was an immediate falling-ofT. 

In November, 19 18, sixty-three ships of 235,000 tons 
were delivered; in December forty-five ships of about 
192,000 tons. 

January, 19 19, saw the previous month's figures cut 
in half. In January there were delivered 21 ships of 
a total of about 96,000 tons. Only fifteen of these were 
steel ships built in the United States, their tonnage being 
about 80,000 gross. An additional steel ship was Japa- 
nese-built, of 6,000 gross tons. In August, 191 8, the 
figures had been 245,000 tons. 

England can keep up an average of 2,500,000 new 



AMERICA'S MERCHANT SHIPPING 293 

tons a year. What mark is the United States going to 
set for itself? 

Unless the business men of the country become pene- 
trated with the facts and bring their pressure to bear, 
there is danger that the high hopes founded on the splen- 
did start which the United States made in 1917 and 
1 9 18 in the speedy creation of a great American mer- 
cantile marine may be changed to bitter disappointment. 

Mr. Charles Piez, director-general of the Emergency 
Fleet Corporation, outlined before the Senate Commerce 
Committee in the latter part of January of this year a 
proposal for reducing the shipbuilding programme which 
had been decided on in war time. He advised the can- 
cellation of 1,500,000 tons of steel shipping already con- 
tracted for, the reduction of the original programme of 
16,000,000 tons to 13,000,000 and the annual production 
of 2,000,000 tons, which is "about 40 per cent of the 
normal capacity of the existing yards." As Mr. Piez's 
figures are in deadweight tons, his proposal then would 
give a total of approximately 8,666,000 gross tons of 
shipping to the United States by an annual production 
henceforth of 1,333,000 gross tons. 

A great merchant fleet, therefore, that would begin 
to be comparable to Great Britain's is not in sight for 
the United States. 



CHAPTER XI 

EDUCATION FOR FOREIGN TRADE 

British and German Methods of Approach — Democracy 
in Commerce — An American Policy Should Be For- 
mulated — Training Must Begin In School — Foreign 
Trade Is Established Slowly— Two Years To Get Re- 
sults, Five To Found Permanent Market. 

Neither the British nor the Germans, the leaders in 
the winning of foreign trade, rushed into foreign mar- 
kets with the expectation of easy conquest They knew 
that to get and hold foreign trade of enduring value they 
had to approach it in no overweening spirit, but with 
proper appreciation of all that was involved and with 
the disposition to pursue with system and method the 
course which reason and experience showed must be fol- 
lowed. They contemplated it as a matter of national im- 
portance. 

The German method of approach was based on the 
calm and dignified procedure that had proved so success- 
ful with the Briton, but it added new and carefully 
thought out ways of assuring success and on a great scale. 
Usually in a new market a German of high standing, al- 
most of ambassadorial rank, having credentials from 
his Government, arrived in the field, made a lengthy stay 
and dealt openly with everything but the question of 
commerce and of trade penetration. He was the pioneer. 

294 



EDUCATION FOR FOREIGN TRADE 295 

His secretaries and assistants were men picked for their 
ability to discern and to judge accurately. He returned 
to Germany and the results of his work and of his ob- 
servations in the foreign country were studied and tabu- 
lated and then there went out an official business repre- 
sentative, also of special training and discernment, whose 
mission was to discuss on a high plane in the foreign 
country the question of trade relations with Germany. 
It was only after this second representative returned 
home and his reports were carefully analysed that the 
actual business getters were sent out from the various 
groups of German industries to begin the active work of 
establishing German trade in that particular country. 
And they were no mere order-takers or travelling sales- 
men. They were to be resident trade representatives, men 
selected to settle down in the country, under contract to 
stay for a certain number of years, if not permanently. | 

The whole process was gone through with extreme de- 
liberation and care and no attempt was made by the 
leading industries to obtain business in the foreign coun- 
try until they had accurate knowledge of the nature and 
precise form of the products which the foreign country 
desired and until they had actually made up the special 
lines of goods and had satisfied themselves, not only re- 
garding costs and prices to be obtained, but also regard- 
ing the desirability of their devoting part of their manu- 
facturing resources to that particular line and for that 
particular country, rather than to other lines or for other 
countries. The political side of the question was consid- 
ered with no less care than the economic and social sides. 

All the German manufacturers were imbued with the 
importance of not making a false start. They planned 
slowly and prudently; they studied everything pertain- 



296 AMERICA IN WORLD MARKETS 

ing to their subject and they became amazingly familiar 
with all its details. They were able to show the foreigner 
at every point that they knew more than he, that they 
could always teach him something ; they had foreseen his 
special problems and had prepared solutions for them. 
Permanency was a prime consideration. 

The whole German business world was taught to con- 
centrate its attention on the importance, in the national 
interest, of winning foreign trade. Legislation and busi- 
ness policies were shaped for the purpose. 

The British, the French and the Germans have had 
their characteristic way of envisaging foreign trade. 
American manufacturers can now enter with their own 
special attitude. They can emphasise it by proclaiming 
their democratic ideals and their fundamental principles 
of fair play, of co-operation and of service with respect 
to those with whom they deal, so that the idea may be 
conveyed that their aim is not for one-sided gain but for 
mutual profit. The American ideal, it is to be hoped, will 
be that indicated by the purpose to uphold democracy in 
trade and commerce, to repudiate the doctrines of com- 
mercial rivalry and ungenerous competition and to dis- 
avow any desire for conquest or for the conducting of 
economic war or anything that might by any stretch of 
the imagination be described as "warfare" in trade. 

Democracy in commerce, as a distinguished American 
economist has said, would prompt us to recognise the 
rights of our foreign competitors and to seek the welfare 
of those with whom we trade, in order that we may con- 
tinue to share in a welfare to which we contribute; mu- 
tual good will inevitably follows and where good will' 
exists war is impossible. Democracy in commerce pre- 
scribes the continual exercise of what has been called The 



EDUCATION FOR FOREIGN TRADE 297 

Golden Rule of Business. Naturally, account must be 
taken of the measures adopted with regard to foreign 
trade by other countries. There must be organisation 
to meet organisation and, as far as possible, government 
support to meet government support. We must meet 
foreign competition, that competition which is the life 
of trade, and America then will have the privilege of 
setting the example in competition, of the constructive 
and not of the destructive and fiercely combative kind. 

The United States has the wonderful opportunity of 
taking the lead in shaping the methods of carrying out 
trade nationally and internationally. It has the oppor- 
tunity of promoting commerce that will lead to peace and 
of forever discrediting the commercial methods that have 
led to war and, instead of struggling for monopolistic 
control and domination, as the Germans had done, this 
country can establish international good will that shall 
include all who are willing to participate in commerce in 
an upright and honourable way. 

American manufacturers must get together if they 
are to win foreign trade in a big way and in fairly rapid 
fashion. Competent, experienced leaders for groups of 
industries would be an advantage of the first magnitude. 

A definite foreign trade policy should be established. 
Measures should be decided on for dealing with those 
who violate it and who thus detract from the good re- 
pute of American industry and commerce. Foreign 
trade agents should be selected, well-paid experts, and 
the American manufacturers should not enter the foreign 
field until fully equipped, after proper study, with right 
products at right prices and with the feeling that they 
are entering foreign trade not as a side line, but as a 
vital feature of their business, 



298 AMERICA IN WORLD MARKETS 

A resolution was adopted at the Atlantic City busi- 
ness congress calling on industrialists and Government 
to promote education for foreign trade. "In the larger 
opportunities which are to be opened to American busi- 
ness men to play a part in the international commerce 
of the world," it stated, "the need will be felt for more 
men who are trained to a knowledge and understanding 
of the language, the business methods and the habits of 
thought of foreign lands. Complete success can only 
come to those who succeed in putting themselves into 
full accord and sympathy with the peoples with whom 
they are to deal. 

"We urge upon our industrials that they take steps 
to provide opportunities to young men to obtain an edu- 
cation in the practices of overseas commerce and finance 
and in the practical uses of foreign languages. 

"We call the attention of the various departments of 
Government and the attention of educators to the im- 
portance of this matter and ask that special efforts be 
made to supplement the valuable work already done and 
to open up every facility to the furtherance of a success- 
ful prosecution of this educational work." 

As already stated, it would be idle for them to think 
of going after foreign trade by sending out a salesman 
with a bag for a few weeks' tour. One of the authori- 
ties of the Standard Oil Company, who had much ex- 
perience in directing men abroad and who can speak with 
some weight on the way in which men should be 
trained for foreign trade, has said : "We must go back 
of the college and into the high school, and there sow 
the seeds of at least complacent endurance of the idea 
of emigration to foreign countries to carry on America's 
foreign trade." 



EDUCATION FOR FOREIGN TRADE 29^ 

Mr. E. M. Herr, president of the Westinghouse Elec- 
tric and Manufacturing Company, has stated in this con- 
nection : 

"Before the war we did a comparatively small part of 
the business of furnishing foreign countries electrical 
machinery, but we will not keep even this small part of 
the business long — though we should succeed in secur- 
ing a great many orders while Europe is prostrated — 
unless we invest our money there, arrange ample credit 
facilities, and send our well-trained young men to those 
lands, not to make a business trip or excursion, however 
complete or extended, but to settle down and make their 
homes in such countries, learning the needs and tastes of 
the people, not by casual observation but by intimate, 
friendly, long-continued personal, sympathetic contact. 

"In addition to adapting our goods to export require- 
ments, we must arrange to give service in this trade at 
least as good as in our domestic market. We should 
never forget in any industrial business that we are selling 
service as well as product, and that, however good the 
quality of one's product, if the material does not come 
when needed, is not packed properly, or in any other 
way our service to the customer is unsatisfactory, the 
transaction fails to tend to tie him to the producer and 
permits a competitor to obtain a foothold not otherwise 
possible. These are ordinary principles of business, but 
apply with unusual force when we are dealing with a 
customer in a foreign land." 

As a guide to American manufacturers contemplat- 
ing entry into foreign markets, and as an aid in provid- 
ing equipment for foreign trade, Mr. B. S. Cutler, Chief 
of the Bureau of Foreign and Domestic Commerce of 
the Department of Commerce, 7 advocates the establish- 



300 AMERICA IN WORLD MARKETS 

ment of a Bureau of Industrial Practice with the follow- 
ing subdivisions : 

i. A Division of Shop Practice. Machinery and arti- 
san methods here and abroad can be studied, measured, 
compared and published to the infinite advantage of shop 
executives, since most of us never progress beyond the 
limit of our own originality. 

2. A Division of Material Valuation. The original 
sources, the handling and grades of foreign and domestic 
materials are seldom thoroughly understood by the user ; 
often he buys in a rising market at prices made up he 
knows not how, although he may have bargained hard. 
Neither does he know the available stocks. 

3. A Division of Information on International Water 
and Railways. A traffic adviser to commerce and for 
commerce, an advocate in favour of proper trade routes 
could render great service. 

4. A Division of Distribution Economy. The devel- 
opment of sensible delivery methods would cut down 
overhead expense to a substantial extent. 

5. A Division of Cost Finding Methods. This has al- 
ready been done in a degree for some purchasing offices. 

The head of the foreign department of one of the great 
American manufacturing corporations with an estab- 
lished foreign business in every important country 
around the globe, a man of unusual personal experience 
in foreign trade, would like to impress on American man- 
ufacturers generally that foreign markets are not won 
easily or rapidly. It takes two years, he affirms, to begin 
to get results and five years to have an established trade, 
that is presupposing that the manufacturer has proceeded 
in accordance with the very best practice, with ripe 
knowledge and the utmost care. 



EDUCATION FOR FOREIGN TRADE 301 

If Americans are to create a great permanent foreign 
trade, they must set themselves to the creation of new 
markets. They must look over the undeveloped areas of 
the world, discover their resources and opportunities and 
contemplate the creation of transportation facilities and 
the financing in an important way of the areas or special 
commercial developments they propose to exploit. They 
will have to count on investing capital, granting credits, 
accepting and carrying foreign bonds and securities. 

Direct participation by governments in the purchase 
and sale of staples and manufacturing materials and in 
the development of industry and commerce; the estab- 
lishment of international credits for this purpose and in 
substitution for ordinary commercial credits, must 
powerfully affect the heretofore established methods of 
foreign trade and create a condition that will take time 
to work out, even on the part of governments and bank- 
ing systems. For the ordinary business firm it will in- 
volve many questions for the solving of which there is 
no positive authoritative source of information to which 
they can have recourse. 

Under the new conditions education for foreign trade 
will be a more essential preliminary than ever for the 
establishment of a great permanent foreign commerce. 
Education of the kind cannot be expected to be quickly 
acquired, especially as American industry may be re- 
garded as entering only the first grade of the curriculum. 



CHAPTER XII 

OUR NEW OBLIGATIONS TO THE WORLD 

Duties That Accompany America's Financial and Com- 
mercial Supremacy — Warnings Against One-Sided 
Trading — America Must Supply Food, Materials and 
Credit — Will Be Expected to Invest in Foreign Se- 
curities — Problems of Relations with Other Peoples 
— Business Men the Natural Leaders in Difficult 
Times. 

This country did not go out seeking supremacy, com- 
mercial and financial. It had this supremacy thrust upon 
it. 

Our commercial and financial greatness, however, has 
brought with it duties and obligations which a power- 
ful nation animated by high ideals cannot overlook. And 
although they are of a moral order, to neglect them 
would subject our people to penalties of a very practical 
kind. Thus it is imperative that Americans shall not be 
grasping in dealing with other peoples, that they shall 
be fair and serviceable in trade, that out of their bounty 
they shall contribute to alleviate the sufferings of other 
peoples with a lavish hand and a generosity worthy of* 
a great people in the time of its greatest prosperity. 

Mr. William B. Colver, Chairman of the Federal 
Trade Commission, has said that any programme for 
the United States in the new era "looking to the build- 
ing on top of the present credit balances unending moun- 

302 



OUR NEW OBLIGATIONS TO THE WORLD B03 

tains of international credits will tend, not only to make 
the United States the most hated nation in the world, 
but to mark her for destruction. It means commercial 
imperialism." 

Secretary Redfield has deprecated any hurried rush 
for foreign trade. "I do not think," he said, "that this 
is the hour for America as a nation to boom great, ag- 
gressive conquests in the economic world abroad. 

"It seems to me that if to the $8,000,000,000 due us, 
which is certain to be $10,000,000,000, if to this is to 
be added the credits necessary to spread an intensive 
and worldwide rush for all the trade we can get, we 
would be piling credit on credit, balance on balance, and 
run a certain danger lest, adding to the debts due us on 
one side, we take away in some measure the earning 
power of those people to whom we must look to pay us 
what they owe us now and what they are to owe. 

"We have a great problem, the problem of supplying 
the world food and equipment in a very large degree and 
to furnish the credit with which they must pay us. In 
what form it will be done I am not sure, but I hope it 
will very largely take the form of our investing as indi- 
viduals and associated organisations of one kind or an- 
other in the securities from abroad which will be offered 
us here. 

"If we do not extend our acceptance in this way, then 
France and Belgium and Italy and Serbia and Poland 
must go without food, materials and equipment to re- 
store their life. It seems to me that just as a common 
sense American aids a debtor who has ample assets if 
given a helping hand, it is now the merest common sense 
to extend the helping hand of business to those coun- 
tries." 



304 AMERICA IN WORLD MARKETS 

Mr. Paul M. Warburg, formerly of the Federal Re- 
serve Board, said in his address at the Atlantic City Con- 
gress of business: "In the war we have made common 
cause with the Allies. We should likewise make common 
cause with them in seeking the solution of the immedi- 
ate problems of .reconstruction which they face because 
of the efforts they put forth in the war. These problems 
peculiarly depend for their solution upon commerce. 
Raw materials and industrial equipment which we pos- 
sess the Allies urgently require, that they may reconsti- 
tute their economic life. We should deal generously 
with them in sharing their resources. 

"In order that we may share our materials with the 
Allies, we must also provide them with credits through 
which they may make the necessary payments. 

"As I see it, our future economic position will be of 
such strength that it will be difficult for many countries 
to keep their exchanges at par with us. They are not 
likely to have sufficient quantities of the goods required 
by us, nor will they have large amounts of gold to spare, 
and therefore, in payment of the things we sell them and 
of the interest they will have to pay us, they will have 
to try and find something else than goods that we may 
purchase from them ; that is, they will offer us the indi- 
vidual or collective obligations of their nationals, or their 
industrial enterprises, or such securities or assets of other 
countries as they control. If we want these countries 
to continue to be able to buy our goods, it is therefore 
incumbent upon us to prepare ourselves to grant these 
foreign credits and to buy and assimilate these foreign 
assets." 

That America's manufacturers and merchants are fully 
alive to the condition and spontaneously willing and 



OUR NEW OBLIGATIONS TO THE WORLD 305 

eager to play a noble and generous part was shown by 
the resolution on "international reconstruction" which 
was voted at the Atlantic City congress. 

"In war," it said, "we have made common cause with 
the Allies. We should likewise make common cause 
with them in seeking the solution of the immediate prob- 
lems of reconstruction which they face, because of the 
efforts they put forth in the war. These problems pecu- 
liarly depend for their solution upon commerce. 

"Raw materials and industrial equipment which we 
possess the Allies urgently require, that they may recon- 
stitute their economic life. We should deal generously 
with them in sharing these resources. 

"In order that we may share our materials with the 
Allies, we must also provide them with credits through 
which they may make the necessary payments. 

"Our ocean tonnage must supply our troops overseas 
and help to provision the inhabitants of war-devastated 
regions. The part of our ocean tonnage not required for 
these paramount needs, and vessels of associated coun- 
tries which are in a similar situation, should be entered 
into the common service of all nations. This common 
service should secure to all nations their immediate needs 
of food, raw materials, and transport for their products." 

Nations have become powerful under two kinds of 
leadership, that of the great captains in the field and that 
of the great commercial men of enterprise. The seed of 
the Alexanders, Caesars, Napoleons has perished. The 
great figures in industry are the only world conquerors 
of our time and in the future. To the enterprise and 
energy of business men we owe our great modern prog- 
ress. To them by rightful title belongs leadership in the 
amelioration of world conditions. 



PART IV 
AN ALTERNATIVE FOR FOREIGN TRADE 

CHAPTER I 

DEVELOPMENT OF THE HOME LAXD 

A Rare Opportunity Offers — Replace the War Urge 
by a Peace Urge — Scheme of "Beautiful America" 
—Problems of the Hour .Would Vanish— How 
United People Can Work for General Betterment — 
All Humanity Would in This Way Be Benefited. 

This country is great and prosperous as no country 
ever was before. It is eager to do great things. Its eyes 
are scrutinising the horizon for opportunities. The whole 
world is being searched for them. And yet here at home 
is an opportunity of the most grandiose kind, worthy of 
the noblest efforts of the greatest and richest people in 
the world. 

Our sudden growth of prosperity has brought with it 
a huge problem. We have factories, machinery, labor, 
money, raw materials — all that is needed for vast indus- 
trial production far greater than our country can at pres- 
ent absorb. To reduce in any great degree the high pitch 
of production which the war has evoked would be calam- 
itous. We cannot think of slipping back, of letting wages 
go down, fires go out, wheels stop; of seeing the park 
benches filled with the unemployed; poverty, misery, and 

306 



DEVELOPMENT OF THE HOME LAND 807 

suffering rife; rust and cobwebs on the tools of indus- 
try; the wind blowing through broken panes into fac- 
tories cold and dark, the fine burst of war-time energy 
and enthusiasm extinguished ; men growing stale ; Bolshe- 
vism creeping upon us. This cannot be, we say. The fine 
fire and vigor is still with us. We shall find a way. 

Let us not deceive ourselves. If we do not find a 
way, and fairly soon, we shall certainly begin to sink 
back, slowly, gradually at first, but the decline to dulness, 
is made with increasing speed. 

The way that most of us now have in sight is the for- 
eign market. If home demand does not take all of our 
production, there is nothing left but to take the surplus 
abroad. There we can create a new trade that will take 
care of all our increased productive capacity and guaran- 
tee us ever new industrial growth and expansion. 

Let us hope it will. Nothing can be more valuable to 
us, going out to conquer, than the conviction that we are 
certain to win. But, once more, let us not needlessly 
incur the risk of deception. 

The war has changed many things, foreign markets in- 
cluded. We are the great creditor nation ; we cannot be 
sure that the others will be willing to go on running into 
debt to us. The foreigner may not need the things we 
would most like to sell; he may not have the money to 
pay for them ; we may not be inclined to accept the wares 
he would offer in exchange for ours. There may be 
competitors in the foreign market, selling more cheaply 
than we, having better banking arrangements, or allow- 
ing better credit terms. Besides, to get into a foreign 
market takes time — two years, we learn, before one can 
legitimately hope for a show of results; five years be- 
fore one really gets going. 



308 AMERICA IN WORLD MARKETS 

Yes, but we shall do the thing in a new way and with 
a war-time rush. The worlds stock of goods is depleted ; 
we have the goods, we have our new ships, we have our 
foreign banks ; we shall get the business. Let us fervently 
hope so, although the expert, the man who has had experi- 
ence, will keep on affirming "It takes time," and although, 
as indicated elsewhere, our notion about new ships was 
not altogether exact. The new ships will not be there in 
the quality or in the volume most of us had expected. 

Let us not by any means overlook the foreign market. 
Let us hope and believe that it may quickly prove to be 
at least part of the new outlets we need. 

But if we count on the foreign market as our only 
hope, and for one reason or another it should fail us, 
if there should be some hitch, what then? 

Is there not some alternative for the foreign market? 
Let us see. 

We have seen the urge of war, the wonderful national 
spasm of effort that can concentrate all energies on the 
accomplishment of a determined end, when that end is a 
great one. Can we not stir up a peace urge, with an 
end that merits the piling together of all our national 
energies and the directing of them at its fulfilment? 

What greater aim could a people set before itself than 
to make its country beautiful, to make it a model and 
ideal land to live in where all things worth while in life 
are made available to all, where comfort and well-being 
are made general, where all are made happy ? Could not 
this aim serve to inspire the great peace urge? If it 
could, then we should have no absolute need of the for- 
eign market. From the merely economic point of view 
we should have something far superior. 

War, the killing of men, the devastation of countries, 



DEVELOPMENT OF THE HOME LAND 309 

the desolation of homes, the reversion to savagery, can 
perhaps be best compensated for by a great combined im- 
mediate striving, not merely for a quick return to the 
ways of civilisation and progress, but for an intensifica- 
tion of them such as had never before been seen, for the 
reaching in one grand bound of the goal towards which 
we have been heading slowly, with gains and with set- 
backs, with no assured confidence of final success. 

There is a chance now that may not come again. 
America is rich. Never before has it been so rich, so 
prosperous, so self-confident, so conscious of its own 
giant strength, so tingling with vitality and energy. It 
may not again for many a long day be in such splendid 
shape for the undertaking of a great concerted enterprise. 

The urge of war, for its best handling, is supposed to 
call for a great leader. The thought may arise that a 
peace urge would be impossible without an eminent cap- 
tain to summon forth the whole people, to arouse their 
enthusiasm, to inspire a spirit of eager desire for action, 
to show the way and to carry them along irresistibly and 
with ever increasing zeal for the end in sight. 

But even if a great chief is lacking, the start could well 
be made. The leader, if he was imperatively necessary, 
would crop up with the progress of the movement. 
American business men, organised in groups or in a body, 
could undertake the leadership. To them really it be- 
longs to work out plans, to determine the form of co- 
operation which is to be demanded from all the units 
and elements of the community. And, be it noted, it is 
not generosity and sacrifice that really are called for. 
Nobility of thought and generosity of ideals here find 
themselves attended with intelligent self-interest. 

Eighteen months of war showed the way in which an 



310 AMERICA IN WORLD MARKETS 

organisation for this purpose can be created on a prac- 
tical basis. The War Industries Board had more than 
two score sections which directed the main groups of 
industries in the war urge. The Conservation Division 
of the Board called in hundreds of separate industries — 
not to direct them, but to learn from them how they 
should best direct themselves for co-operation in the great 
combined war effort, and to make it mandatory for the 
industries to carry out the plans they themselves had 
proposed. Mr. A. W. Shaw, Chief of that Division, con- 
siders the peace effort here proposed not only desirable 
but entirely feasible. 

The organised industries could undertake to beautify 
the cities and towns, to lay out and improve parks, to 
build roads, to develop communications and transporta- 
tion, to wipe out unsightly and unhealthy tenements and 
replace them with comfortable and attractive dwelling 
places, to erect public buildings that would elevate the 
mind and inspire civic pride. Other organisations could 
lay the plans for the education of youth and for the 
mental, spiritual and aesthetic development of the whole 
community, for the conservation and improvement of 
health, for sports and diversions of every desirable kind. 

New outlets for products would thus be created and 
business would boom in a way we have not yet wit- 
nessed. 

Secretary Lane's undertaking for the reclamation of 
waste lands — swamps, arid land, cut-over land — while 
primarily conceived for the purpose of providing imme- 
diate work and eventually homes for returning soldiers, 
would fit in admirably as a part of this enterprise. Mr. 
Lane's proposal to pay the returned soldiers, and such 
other workingmen as joined in the enterprise, for their 



DEVELOPMENT OF THE HOME LAND 311 

work in reclaiming the land under the direction of ex- 
pert engineers, for the work done while learning to farm 
it under direction of the Department of Agriculture ex- 
perts, for their work in building the community centres 
which they are ultimately to occupy, and in learning me- 
chanical trades against the day when their community 
centres shall have become hives of industry, and then 
to deed over to each soldier or civilian worker a sec- 
tion of land, with farming implements and equipment, 
and a dwelling in the community centre, on an easy long- 
term payment plan, is economically sound and is a wholly 
justifiable use of public funds since it assures a hundred- 
fold return to the nation of the moneys it advances, as 
well as benefits and services of many kinds which cannot 
be calculated in mere terms of wealth. It might well 
serve as a model for other features of the broad scheme 
here under consideration. 

Cities, towns and community centres of all kinds would 
inevitably be intensely interested in the scheme, once it 
was set vividly before them. The emulation which we 
witnessed between cities and towns — in service flags, in 
"going over the top" in Liberty Bond sales and War 
Savings Stamp sales — would be duplicated in this "Beau- 
tiful America" project and would be a stimulating in- 
fluence in getting the most desirable results. 

During the war there grew into popularity the inter- 
esting practice of holding Block Parties. On a certain 
day a given city block was decorated with American flags 
and banners of all the original nationalities of those resid- 
ing in the block, a large service flag showing by its stars 
the number of men the block contributed to the military 
forces of the country and each house displaying conspic- 
uously the service flag of , those who dwelt in it. At night 



312 AMERICA IN WORLD MARKETS 

the block was gayly illuminated, a band or orchestra 
played while scores of couples danced on the street. An 
interesting fact is that even in the humblest districts all 
rubbish was cleared away; windows were washed; 
houses, railings and areas were cleaned and brightened 
up, and the street itself was scrubbed for the occasion 
to serve as a dancing floor. The inhabitants donned 
their best clothes and there prevailed for the time being 
a general sentiment of good fellowship. The war had 
engendered "Block pride." Furthermore, there was a 
notable emulation between the various blocks to outdo 
one another in making their block the most attractive 
and in holding the most successful Block Party. 

The Block movement had hardly got well started when 
the armistice was signed, but even in the brief period 
during which it lasted, it showed a notable evolution and 
it would have been interesting to be able to see how far, 
and in what way, it would have developed if it had con- 
tinued in existence. 

Here was a movement that came about without lead- 
ership, that started spontaneously from the people them- 
selves. It is easy to imagine how, under broad organi- 
sation, it might have been turned to account as an im- 
portant factor in the war effort. For a great peace 
effort, such as that here proposed, block organisations 
and others representing subdivisions of the population, 
are manifest opportunities of the greatest promise. 

This country does not need wealth. It has more now 
than it could reasonably have hoped to have a generation 
from now in the normal development of peace. This 
country grew great by its domestic industry and com- 
merce. It now needs more commerce. It needs work 
for its new factories to give returns to invested wealth, 



DEVELOPMENT OF THE HOME LAND 313 

to keep workers employed, to hold wages high, to main- 
tain good living conditions, and to continue the pros- 
perity and welfare of the nation. Whether that increased 
commerce is foreign or domestic may not seem to matter 
greatly, as long as it is forthcoming. As a matter of 
fact there will be a distinct advantage if an appreciable 
part of it is domestic. Let us not be misled by sophis- 
tries about the superior boon of foreign trade. 

The industries that are now prosperous and are bloated 
with a capacity for production would be making the most 
precious kind of an investment in helping to develop their 
country in the way outlined, in creating new markets 
for themselves. They have to make investments to get 
foreign markets. They have to put out funds in order 
to obtain foreign orders; they have to put money into 
the manufacturing of goods for the foreigner; they have 
to sell their goods to the foreigner on credit. Thus they 
have to work for the foreigner and to finance him before 
they can reap profit from him, and they are benefited 
themselves only after they have benefited him. How 
much less precarious and how much more beneficial to 
themselves will be their investment in their own country 
which is blessed in superabundance with natural re- 
sources that make it almost independent of the outside, 
quite differently from the foreign country which must 
give and take in order to prosper and where a shift in 
the balance of exchange of products may affect its own 
prosperity and that also of the nations with which it 
trades. How much more secure and reliable is American 
domestic trade and what a benefit to America to have 
it constantly expanded. 

The great prosperity which the war effort brought to 
the United States would be nothing compared to the 



314 AMERICA IN WORLD MARKETS 

prosperity which this peace effort would bring. The war 
effort prosperity came through the production of things 
that were made merely to be destroyed, to be blown to 
atoms or to be worn out in a very brief time. Pros- 
perity from this peace effort would be based on the pro- 
duction of things that endure and that guarantee a con- 
tinuance of demand. The war work was for abroad and 
was but temporary. The prosperity that comes from 
work done for a home country such as ours does not 
end with the immediate effort; it increases in geometric 
progression with continuous systematic work. 

America's commercial greatness, as has been said, was 
established through the home market. The market was 
here and it kept growing in its demands and requirements. 
But little effort had to be made for its cultivation. It 
was the tilling of a rich virgin field. The time has now 
come for intensive scientific cultivation of it. The op- 
portunity is here; it is boundless, practically unlimited. 
And no mere dream of fortune is this, but the reasoned 
practical demonstrations of common sense. 

Every single industry, profession and line of trade is 
interested in pushing the plan with every ounce of their 
energy, for every one of them will be the gainer by it, as 
they could be gainers in no other way. 

The workers of the Nation are no less vitally inter- 
ested in throwing themselves into the movement in the 
heartiest way, since it involves for them better times, 
superior living conditions, recognition of their true status 
in the industrial life of their country, the stimulation 
of their efforts to elevate their position, the assurance 
of the best that life offers for their children, the coming 
of those very conditions for bringing about which they 
have organised and agitated and even have allowed them- 



DEVELOPMENT OF THE HOME LAND 315 

selves to be seduced by the will-o'-the-wisp promises of 
"leaders," some sincere and some merely unscrupulous. 

Health, joy, energy and patriotic ardor must, as a re- 
sult of this plan, be stimulated and vitalised in the whole 
people. The war tended to bring all the people together, 
to allay bickerings and suspicions, to make them feel 
more vigorous and forceful and more ready to make 
mutual concessions and live and let live. Yet a war aim 
as a stimulus would not be comparable with this peace 
aim in calling forth ambition and energy and in promot- 
ing good fellowship and co-operation, and these of course 
are at the basis of all the development and progress we 
can hope for. Bolshevism, the spirit of dissension, 
hatred and destruction, would not dare raise its head. 

The Union, its Government and Administration, 
through this movement would be exalted to a degree to 
which no state in all history has ever attained, for its 
foundations would be the willing co-operation, the unity 
and the happiness of a whole people, in the highest grade 
of civilisation and of expertness in the development and 
manipulation of the means of progress, and living in a 
land of unrivalled resources. 

Proper handling of this scheme will make of Ameri- 
cans the scientific market-makers of the world. They 
will have become the professional business creators. 
No reason will there be for the scope of their efforts 
being limited to their own country. They will be able 
to use them also in other lands, for their own benefit 
and, even better still, for the betterment of the whole 
human race. One hesitates at sweeping general phrases, 
and yet so it actually is; the way is here plain for lift- 
ing up and ennobling our common humanity. 



CHAPTER II 



PROMPT ACTION NEEDED 



Conditions Now Ripe For New Great Undertaking — 
American Industries Are Pausing before Fresh Start 
— Home Trade Versus Foreign Trade — Financing 
Needed in Either Case — Machinery Manufacturers 
Preparing Campaign — The Most Desirable Purpose in 
Planning Public Works. 

The difficulties that confront us in planning to de- 
velop the resources of foreign countries in order to 
create for ourselves a great and permanently reliable 
outlet abroad for our industrial production do not pre- 
sent themselves when we consider the development of 
our resources and trade opportunities at home. The 
question of financing, when applied to our own country, 
ceases to be a problem. The long delays of investiga- 
tion of conditions, resources and opportunities and of 
education for the new prospective trade abroad are not 
needed. 

At home we already have the initial development in 
all its various forms, a development of vast magnitude; 
our problem is merely one of elastic expansion, normal 
and methodical. The opportunities that here offer them- 
selves are, in view of all the circumstances, unparalleled 
anywhere on earth. With the whole people working as 
a unit this expansion would be instantaneous; no wait- 
ing for something to turn up in a country out of sight 

316 



PROMPT ACTION NEEDED 317 

and out of reach. Human progress normally is slow. 
War speeds it Up. If we mobilise all efforts for it as 
we did in war time, we can make it advance by leaps 
and bounds. Capital and labor questions could be set- 
tled in a new and more satisfactory manner and the bet- 
ter day for all would surely come. 

Nor is this an adventure into the realm of pure imag- 
ination. A phrase uttered by President Wilson in the 
Italian Chamber of Deputies is apposite. "What men 
once considered theoretical and idealistic," he said, "turns 
out to be practical and necessary." So far is this pro- 
posal from being merely idealistic that it is advanced 
as an urgently necessary means of saving a serious sit- 
uation. 

Every foreign country of importance is going to work 
out for itself the greatest possible measure of self-suf- 
ficiency. The manufacturers in other lands have come 
around to the American policy of big quantity produc- 
tion. The war forced it on them. America does not 
need to strive for self-sufficiency. What she may rightly 
strive for is the very fullest form of self -development 
and self -embellishment. 

Normally there is a certain natural repugnance to 
taking up any great enterprise whose form is more or 
less undefined and in which one's own interest is not spe- 
cifically manifest. There is a lethargy to shake off, an 
inward revulsion to overcome. The country was under 
the oppression of this inertia in the period before it en- 
tered the war. War shook it free from the lethargy. 
The heart of the whole nation is now beating faster. No 
task would be too great for it. 

If action is to be taken on this great plan, it should be 
taken without delay. Nature tends to reassert itself; 



318 AMERICA IN WORLD MARKETS 

enthusiasm wanes when pressure is relaxed ; peoples after 
a period of exaltation subside gradually into the old 
routine. If the chance is allowed to slip, it will be more 
difficult to start up again. The money and resources 
which we have in such tremendous abundance may be 
dissipated in other and unfruitful ways. It is flouting 
Providence not to profit by it for the one most worthy 
purpose to which men can apply themselves, the elevating 
of their kind. What excuse for our age and its civili- 
sation if it neglect this unique opportunity to take a giant 
stride in advance? 

Decision, if it is coming, should come soon. Industries 
that could participate are in the state of pause, undecided 
about the fresh start to make. This is the opportune 
moment to point the new road to them. 

It is not the case of one or more great concerns show- 
ing vision and discernment and starting off on the right 
path. The vital interests of the nation are concerned 
in the whole industrial forces of the country choosing 
the right way from the cross-roads we have now reached. 

American industry is on the eve of an important 
change-over in the matter of machinery. It is obvious 
that the principal uses to which American machinery is 
to be devoted should be known well in advance, so that 
machinery manufacturers may be guided in their plans. 
Like everything else, machinery is made in a particular 
way in view of its special market. 

While machinery manufacturers were engaged in 
turning out highly specialised and simplified machines 
for war work, they had not the opportunity to bring 
out all the new and perfected types of machines which 
the evolution of their industry made feasible. The war 
for them has been a marvellous efficiency teacher, While 



PROMPT ACTION NEEDED 319 

in general they were working on old-form products, they 
kept along steadily with their plans for new and per- 
fected machinery. The unification of the country's effort 
and the free intercommunication between our manufac- 
turers and those of the Allies, made it possible to dis- 
cern weak points and good points in machinery construc- 
tion and to design machinery with the special aim of 
making it available for all kinds of workers, even per- 
sons lacking in physical strength, such as women and 
crippled or otherwise debilitated men. All the machin- 
ery manufacturers have this great body of acquired 
knowledge at their disposal. They are now almost ready 
for decision as to their future plans. Unquestionably 
they would rejoice to follow the patriotic instinct and 
throw the great weight of their influence for home de- 
velopment, if only the vista were made clear to them. 

War experiences have had an amazingly broadening 
effect on our whole industrial methods. Those four 
years spent in producing products that were blown into 
shreds on the battlefield did not represent four years 
lost for scientific and industrial progress as the pacifist 
brethren would have it. Instead of losing four years 
we have gained a net advancement in the art and science 
of industrial production of at least ten years. 

How favorable is the hour for putting into reality 
what must have been the vision of every true patriot, 
the aspiration to make the United States overwhelmingly 
powerful, to make America beautiful. 

Every industry, every line of business in the country 
is interested in an early decision. The governing au- 
thorities, national, State and local, who are meditating 
public works to provide labor for the unemployed would 
also be supplied with a most desirable guidance. The 



320 AMERICA IN WORLD MARKETS 

whole people while the exuberance of vigor called up 
by the war is still strong in them are in the best condi- 
tion for being summoned to a new mighty effort. 

And with this great task undertaken and carried on 
by a united people animated by an enduring energy and 
enthusiasm, the future historian might well quote, in a 
new interpretation, Bishop Berkeley's graceful prophecy, 
in a great compliment to America: 

"Westward the course of empire takes its way; 

The first four acts already past, 
A fifth shall close the drama with the day: 
Time's noblest offspring is its last." 



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